Hello everybody and welcome to 2012. The end of the year has inspired all kinds of reviews of the previous year and the implications moving forward. We begin the year with more optimism in a proper housing market recovery, but any growth is expected to be slow and steady rather than quick and dramatic.
We begin with a few general review items. Median home prices have dropped nearly 40 percent nationwide off peak, and some analysts have them dropping another 3 to 5 percent to begin 2012. Overall, the new year could start to bring a leveling off of home prices that will feed into price appreciation. Meanwhile, housing will continue to be affordable and undervalued. Interest rates are expected to remain low for the first part of the year.
The biggest problem moving forward is still the large amount of foreclosed properties. Foreclosures weigh heavily on the market and drag home prices down. Currently there are nearly 2 million home loans that are 90 days delinquent, and over 2 million that have finished the foreclosure process but are not up for sale yet.
The federal government unveiled the Harp II program in November in an attempt to help responsible underwater homeowners with a Freddie or Fannie backed loan refinance. The program eliminated the previous loan-to-value ceiling of 125 percent, and offered incentives to lenders to accept more of the applicants for refinance. It is hoped that this program can help stem the flow of distressed homeowners. We won’t see the new program going into effect until late February and March, so make sure you check back in with us around that time for more.
Recently, more Americans are signing contracts to buy homes, but that rise is tempered by a corresponding increase in cancelled contracts. In November, pending home sales rose to the highest level in a year and a half, but one third of realtors reported a cancellation in October and November. We saw a 7.4 percent monthly jump in contracts to buy existing homes.
Happy New Year everybody!