It is no secret that mortgage interest rates are at historic lows. According to Freddie Mac, the average for a 30-year fixed rate mortgage has been below 4.00 percent for six consecutive weeks. Affordability is rising dramatically due to a combination of housing price deflation and extremely low mortgage interest rates. This combination should allow the national real estate market to recover slightly in 2012.
Nationally, existing home sales started to trend upward at the end of 2011. Sales of previously owned U.S. homes rose for a third month in December to the highest level since January 2011, a sign the housing market ended last year with momentum. This trend is expected to continue into 2012 as the economy continues to add jobs and buyers recognize there has never been a better time to purchase a home.
Here in our home market of Metropolitan Detroit it is well known amongst the realtor community that there is a shortage of quality, saleable properties. Sales jumped 5.6 percent in December in Metro Detroit, the sixth consecutive month with a sales pickup. Oakland County recorded a 2.2 percent increase, while Macomb County declined 1.3 percent. By contrast, multiple listing service Realcomp II Ltd. reported a 9.6 percent gain for Macomb in 2011 and a 3 percent hike for Oakland.
Homebuilders are also growing more optimistic about the housing market. Buyer traffic is improving and the National Association of Home Builders/Wells Fargo sentiment index rose this month to the highest level since June 2007. Nationwide production of new single-family homes rose 4.4 percent to a seasonally adjusted annual rate of 470,000 units in December, according to newly released figures from the U.S. Commerce Department. This marked a third consecutive increase and the fastest pace of single-family housing starts since April of 2010.
Lawrence Yun, National Association of Realtors chief economist sees early signs of what may be a sustained recovery emerging. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”
At the same time another wave of foreclosures could temper enthusiasm in the real estate market as more distressed properties are put on the market. According to Ralph Newkirk, Foreclosure Division Manager at Real Estate One, banks may foreclosure on more homes in 2012 after legal scrutiny of their foreclosure practices slowed their attempts against delinquent property owners in 2011. The real question is “how much inventory out there has yet to come on the market”. More inventory historically means more downward pressure on prices.
This year should be an interesting year for those of us in the relocation industry and build upon 2011 successes as our economy recovers and the America dream of home ownership for more of our clients/transferees materializes.