Economic Projections for 2012
Housing prices aren’t quite done falling, with a 2% drop by the middle of 2012 followed by a 2% increase in the second half of the year.
That’s consistent with the latest numbers from the Standard & Poor’s Case-Shiller Home Price Index, which finds the pace of decline slowing from early 2011. After adjusting for seasonal variations in home prices, the index reports that prices fell 0.6% from September to October in 20 major metropolitan areas.
That is down 3% from October 2010, but an improvement from the dramatic rate of decline after the housing bubble burst in 2006. An end to the decline would give a major boost to the economy. The 33% drop since 2006 has cut into household wealth and discouraged consumer spending, which accounts for more than two-thirds of U.S. economic activity.
Other components of housing are starting to show improvement.
Sales of existing homes will rise 5% in 2012, to about 4.4 million, after a gain of 1% to 2% in 2011. The National Association of Realtors says that sales of single-family homes and condos rose 4% in November over October and 12% over the prior 12 months.
New-home sales will be flat next year, around 300,000. Construction of new homes, including rentals, is on the upswing, however, and will rise 15% in 2012, to about 680,000. This, from 590,000 starts in 2011, the fewest since recordkeeping began in 1959. Housing starts were up 9.3% in November, the best month since April 2010. The gain is largely due to builders putting up apartment buildings, most destined for rental.
Rock-bottom mortgage rates aren’t having much impact. The average 30-year fixed rate mortgage is just below 4%, about as low as ever, and won’t go up much next year as the economy stays in low gear. But more lenders are requiring a down payment of 20% and imposing other, more rigorous terms, discouraging some first-time buyers.
The NAR, which gathers data on sales and prices for existing homes, recently revised numbers back to 2007 and found that the crash in housing sales was 15% worse than previously reported. The revision doesn’t change prices. It gives some hope for firmer prices in the near future, however, because it lowered the inventory of unsold homes. At the current pace of sales, there is seven months of supply, the lowest since February 2007.
Read more: http://www.kiplinger.com/businessresource/economic_outlook/#ixzz1hzDpoFDA
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