With 2011 now behind us, real estate agents and others related to the housing industry are hoping that 2012 will bring a significant improvement to the number of units sold and at least stabilization, if not an increase in the median sales price.
2011 ended with a nice up-tick in sales according to the National Association of Realtors. However sales remain depressed, as are several of the realtors I spoke with in the Metrowest and Central Mass areas. Central Mass, in particular, seems to have borne the brunt of the home sales price reductions and sales lag. Unit sales within the 128 belt have held up nicely, although many homes have experienced a 5-10% appraised value drop, year over year.
Interest rates have held steady at near record lows.
While this is good news for first-time homebuyers and relocating workers, as home affordability is better than at any time in recent memory, many sellers are frustrated.
As home prices continue to drop, more sellers are finding themselves with little or no equity in their homes. This not only makes them reluctant to price their home to market and sell quickly, for many of them, current rules on Loan to Value are making them unable to take advantage of today’s low interest rates and refinance.
So what will 2012 bring? A slight improvement in unit sales, and perhaps a bottom in home prices (I hope!). Here are my reasons for this conclusion:
- Job creation – Over the past several months, it appears that the job market is improving. The Massachusetts unemployment rate dropped to 6.8% in December. This is the lowest level since December 2008. A few key sectors saw increases in hiring, including Manufacturing and Financial Activities. Whether these jobs are well paying or not remains to be seen.
- Continued Low Interest Rates – While we may see an increase in 30 year fixed rates during the next couple of months, as the national economy shows signs of improvement, I do not expect a dramatic rise in rates. Rates are currently around 4.00% for well-qualified borrowers. A rise of .50% should not significantly affect sales. (It will, however, affect re-financing opportunities.)
- Helping Underwater Homeowners – I think we may see action on this later this year. One of the significant factors holding back job creation is the inability of qualified workers to get to where the jobs are, due to being stuck in a home loan that exceeds the value of their home. I believe, although I am probably naïve, that legislation will pass to incent employers to offer relocation packages to help non-executives get out of from under their homes. There is also talk of a share equity program, whereby homeowners who were given relief would have to share any equity appreciation in their new home with the investor who lost money in their last home. After all, home prices will rise at some point, right? Given that this is an election year, and Congress has been completely ineffective, this may wait until 2013.
- Homebuilder Sentiment – Nationally, homebuilding company optimism is making a strong recovery. Locally, several builders I have spoken with think 2012 will be their best year ever. Prices may be down, but in many cases so are cost of materials and labor.
There are a few other reasons for optimism including an increase in household formation, as well as talk of programs to rent REO properties, which may help reduce vacant homes and stabilize prices.
For all of us in the housing industry, let’s hope 2012 is an improvement on 2011. Should you have any questions regarding loan programs or qualifying, please contact me at firstname.lastname@example.org. www.massmortgageblog.com http://www.greenparkmortgage.com/davidgaffin or can reach me on my cell at 508-254-2645.