Published by Alex Manessis and Russ Schreier of Samuel Scott Financial Group
A forecast of the 2012 and 2013 housing market shows increased purchasing of new homes over the next two years. This forecast, released in February by the Mortgage Bankers Association (MBA) gives us insight not only into the trends for the short term, but where the market is headed overall and what we can expect in terms of home value, interest rates, refinance vs. purchases, and new home construction.
First let us examine the projections for Quarter 2 of 2012, as this will provide us an insight into the market’s short term prospectus. The number of housing starts for Q2 is projected to increase 3%, the fourth straight quarter of growth, to 690,000 homes (seasonally adjusted annual rate) breaking ground from April-June. The number of homes sold is expected to remain roughly the same as the first quarter of 2011, somewhere in the neighborhood of 4.39 million homes (again a seasonally adjusted annual rate).
What is important to note about these second quarter projections is the end of Operation Twist, which will bring with it a rise in interest rates. April-June is estimated to have a 30-year interest rate of 4.3%, up 30 basis points from the 4.0% seen in January-March. According to these projections, every quarter after Q2, for six quarters will experience a .1% increase in rates, meaning
interest rates near 5% by the end of 2013. For homeowners, this means that the ideal time to refinance is now while the rates are still at record lows.
What does the data say about those who are not looking to refinance but instead are looking to purchase a home of their own? Well if the third quarter of 2012 projections come to fruition, July-September will mark the first time the value of homes in America will have increased on average since late 2007 (as measured by the FHFA’s House Price Index). The evidence for the last several months has suggested that 2012 would be the year that the market finally reached rock bottom. These projections show a .2% increase in home values in 2012 Q3 but every quarter following shows increased growth after, with 2013 Q4 projections showing growth in the value of homes at 3.7%. That means it is truly a buyers market right now. The best deal is available right now, so if a potential homeowner has the means to do so they should pull the trigger now.
The big picture for not just for individual homeowners, but for that of the entire housing market is that recovery may finally be on the way, but it will be a long process. Home values are expected to increase over the next year, along with the number of homes sold (both new and existing), and the amount of money spent on mortgage originations for purchases. 2012 is the year of transition, the year where instead of our homes losing money the value stays roughly the same, the year where construction picks up. We have seen positive signs already, including unemployment dropping (now at 8.3% down from 9.0% last year). If these projections hold true 2013 will be a year of growth, providing the market with a sense of recovery. The last five years have been extremely difficult for the housing market and recovery will not occur overnight. However, these positive economic signs suggest that improvements lie ahead. This is good for all parties involved, for potential homeowners this means a stronger economic future, a buyers-market, and low-interest rates. For those in the housing industry, this means the worst is now in the past. For America, this means a recovery to
a sector of the economy that has struggled greater than any other in the last half decade.
You have the ability to move into your dream home and stabilize your financial future, and at the same time help these projections become a reality. If you are interested in purchasing a home
or refinancing your current loan, please contact a loan officer at Samuel Scott Financial Group for more information.