Now that the country dodged the two biggest nonevents of 2012 — the made-in-Washington fiscal cliff and the end of the Mayan calendar — what does the New Year hold for the troubled U.S. housing market?
Beyond the fiscal cliff — which will loom large again in February thanks to more kicking the can down the road by lawmakers — the economic outlook for housing (and the debt ceiling) remains uncertain.
Still, recent housing statistics suggest a revival. New and existing home sales are up. Home builder confidence and prices are rising, although most new households are renters since new potential buyers are kept out of the purchase market by tight lending standards, uncertain employment and crushing consumer debt.
For the third consecutive year, the Foreclosure News Report wanted to peer into the future, asking five prominent real estate economists to predict what will unravel in 2013. They include Mark Zandi, chief economist at Moody’s Analytics, Lawrence Yun, chief economist at the National Association of Realtors, Jed Kolko, chief economist at Trulia, Christopher Thornberg, principal at Beacon Economics and David Shulman, senior economist at UCLA’s Anderson Forecast.
We asked each economist six questions. Here’s a taste of what they had to say.
How did 2012 meet or differ from your expectations?
Yun: I was pleased to see the breakout of home sales and home prices into solidly positive territory in 2012. The strength of recovery was better than anticipated.
Shulman: We were way too low on housing starts (forecasting) 660,000 versus 770,000 where it looks like it will come in at. Recovery started sooner than we expected.
Thornberg: Beacon Economics got it right, inasmuch as 2012 was the year that real estate began to recover in a real way, and that by the end of the year price increases would be quite solid. We were also right in opposing the idea that a second wave of foreclosures would crash the market — that was more or less a figment of the imagination of those espousing such a scenario.
There was no ‘shadow’ inventory.
Zandi: The housing market stuck close to script. As expected, home sales, construction and house prices steadily improved during the year. If anything, I wasn’t optimistic enough about house prices, which posted mid-single digit gains during the year. This was due to a sharper decline in the share of home sales that were distressed — foreclosure and short sales — than I had anticipated. Investor demand for these properties was also surprisingly strong.
Kolko: I expect we’ll see recovery continue with more new construction starts, more home sales, and higher home values than in 2012. Rising prices will lift more underwater borrowers back into positive equity, which will lower the delinquency rate further. However, Trulia’s Housing Barometer shows that the market is 51 percent back toward normal, so there’s still a long way to go before the key market indicators are back to their pre-bubble long-term normal levels. And, “normal” won’t happen in 2013: it has already taken three years for the market to move from its worst point in the bust back to halfway, and the recovery still has years to go.
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