January 18th, 2012
Econintersect: The headline is from Realtor Mag, the official publicstion of the National Association of Realtors (NAR), on 17 January 2012. The article is a little more cautionary than the headline, but still has some optimistic estimates. The NAR has long been noted to be a cheerleader for its "base", the nation's real estate agents. They (realtors) do not expect their representative publication to throw cold water on their livlihood - thus the dispassionate observer often detects less glowing interpretation of the news than does the NAR.
Follow up:Here are some of the specifics, as reported by Realtor Mag:
- Existing home sales are expected to increase 12 percent this year (vs. +2% in 2011).
- Single family housing starts will increase 37% in 2012 (estimate from Moody's). The worst year ever recorded for new home building was 2011.
- Mortgage rates are at historic lows.
- Housing affordability is high.
- 71% of Amaericans say now is a good time to buy a home.
- 26% of Americans expect home prices to rise in 2012 (Fannie Mae December survey). This is up from 20% in 2011.
1. How important is home affordability if there are not buyers, either because they are among the 13 million unemployed or the 7 million who have had homes foreclosed or the additional 7 million who are expected to face foreclosure? Note: The total of prospective homeowners from these three classifications may be less than the sum total of 27 million because the forclosure cohort may have significant overlap with the unemployed group. However, there are several million either missing from the labor force or working for much less than they used to so the overlap may be completely offset (or more than offset).
There probably are somewhere between 10 and 30 million potential home buyers no longer in the market today compared to what the situation would have been before the bubble burst. That is 10-30% less demand for home purchase than what was seen a few years ago.
2. There are serious problems yet to be worked out in many major real estate markets in the U.S. These problems have been documented with detailed data analysis by keith Jurow, author of MVP Housing Market Report. Read some of Jurow's reports at GEI Analysis and GEI Investing.
Sources: Realtor Mag and GEI Blogs (links in article)