2012 Home Sales Look Promising
As the year ended, the housing market saw home sales improve both locally and nationally. Existing home sales increased four percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October.
Home sales were 12.2 percent above the 3.94 million-unit pace in November 2010, leading industry experts to suggest that the signs of a recovery could be around the corner.
Lawrence Yun, chief economist for the National Association of Realtors, said recently that “sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing.”
With the real estate market still considered a buyer’s market, home sales should start to see some improvement in 2012. Existing-home sales should rise, but it is dependent on consumer confidence. If people have confidence that they will have a stable job in 2012, then they are more likely to buy a home. If consumers lack that confidence, then no houses will be purchased. So long as the national economy continues to improve, and people perceive that their budgets will not reduce dramatically, our local real estate market should see improvement.
Housing affordability will continue to be an important aspect of the 2012 real estate market. The conditions of housing affordability, as compared to median family income, mortgage interest rates, and median home prices, were at record highs in 2011.
Here’s something else that Economist Yun said about housing affordability: "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more home buyers to take advantage of current opportunities."
One key will be the mortgage industry. As with other industries, so long as there is a predictable process in the underwriting process, consumers should be able to get a loan. The real estate market can reduce the dramatic boom-and-bust cycles in the future if the mortgage industry can maintain reasonable mortgage underwriting standards. However, 2011 saw some disturbing trends in the mortgage industry.
2011 saw an increase in contract failures throughout the country. These failures are defines as contracts that are cancelled due to declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems, such as home inspections and losses in employment. Real estate industry experts hope that this trend stops increasing in 2012.
The interest rates will continue to stay at low levels. The Federal Reserve has committed to keeping rates low through mid-2013.
Here in Maryland, things look good for 2012. Besides housing affordability and low interest rates, Maryland’s employment outlook looks good. A higher percentage of Maryland's labor force is employed, when compared to other parts of the country. We continue to benefit from our proximity to Baltimore and Washington. Furthermore, since 2007 the average personal income for people in Maryland has grown at a much better rate than the national average.
What should people do in 2012 as they decide about real estate? Well, if you’re a tenant, look to do something before the Spring market hits. Because the rental market is so strong, rental prices aren’t expected to decrease.
If you’re a seller, look to do something in the Spring market. It looks like we will have another normal real estate market this year. This means that we will see an increase in listings since sellers will want to settle on the purchase of their new home before the next school year starts in August. As such, the sales prices will start a little higher than in the Spring of 2011.
If you’re a buyer, work with a lender as soon as you can; so, if there are any roadblocks, they can be taken care of before an offer is written for your next home. Look at new homes also, because the real estate industry expects builders to continue to offer discounts.
Here’s hoping everyone has a great real estate year in 2012!