Want to know where housing will head in 2012?
First, be aware that all real estate is local and these factors are mostly national, but they can give you an indication of trends and the overall direction of housing.
Having said that ff you want to know how housing will fair in 2012, here are five signals to watch carefully:
Watch the Money: More precisely, watch the Fed’s monetary policies; they dictate the supply and cost of mortgage dollars. Federal agencies are backing nearly 9 of 10 mortgage loans. These government backed agencies, Freddie Mac and Fannie Mae (GSEs) set the standards for credit, income, terms, downpayments and appraisals. They can manipulate the potential homebuyer’s access to financing. Currently, they are keeping the interest rates and costs down, but tight credit and property underwriting is choking buyers.
The Fed willingness to continue buying mortgage-backed securities will foretell the availability and cost of borrowing. Today, they are making the market and keeping costs artificially low. Should they start backing out of the market, private markets will have to make up the slack and the cost will certainly increase to open market levels.
Regulation: Don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012. First, Dodd-Frank Act has yet to be detail how banks price loans that are bundled and sold into securities. Second, another set of rules will determine how banks meet provisions that will determine if a borrower has the ability to repay a mortgage.
Shadow Inventory: The Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency. The GSE’s are floated their intensions to unload their inventories in bulk and that could very likely flood the housing market with for sales and rentals.
Rents: As more families look to rentals, as they are today, vacancy rates fall and they are already below their 2006 levels. Rents for both single-family-homes and apartments are rising and when they reach the cost of home ownership (the point of affordability) buyers will begin to move.
Confidence and Jobs: How the public perceives economic conditions directs their spending and homebuying decisions. More and better paying jobs are necessary to support a sustained recovery and a health housing market.