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Where Is the Housing Market Headed?

Written By:
April 13, 2011 at 1:26 PM

Plenty of predictions and premonitions are swirling around neighborhood playgrounds, coffee houses and offices about what will happen to the housing market and mortgage business.

Some prognosticators believe the market has a long way to go and its descent will be lengthy. Whereas others predict that the market has bottomed out and is slowly recovering. In some ways both predictions are correct.

According to Rick Newman, chief business correspondent for U.S. News the housing market has become completely unpredictable, up one day, down the next. In a recent article he says, “Part of the problem now is the uncertainty caused by rising gas prices, which tend to unnerve consumers far more than the added cost warrants, and the nationwide slowdown in foreclosures due to legal questions over fishy bank practices.”

He adds that unrest in the Middle East and Washington’s growing debt problems have added to the housing and mortgage industry mess making the outlook appear sketchy and dim.

He believes that more recession busting clues must appear in order for the housing rebound to truly occur.:

  • The market must experience more job gains
  • Foreclosures must dwindle
  • The homeownership rate must stabilize
  • Washington must get organized on legislation and policies
  • Consumers opt to purchase a home versus paying high rent

He adds that the market also needs more buyers willing to take a leap of faith and jump into the market while prices and rates are still low.

He says, “Getting a good deal on a home is a function of two things: price and interest rates. Prices may fall a bit further, but it's very likely that interest rates will go up over the next several months, as the global recovery picks up steam and investors begin to anticipate the end of the Federal Reserve's super-stimulative policies. So in terms of mortgage rates at least, the bottom may be now.

The Housing Market is Ripe for the Picking

According to economist Mark Zandi of Moody Analytics, “Housing markets across the country are increasing a good buy. “ Zandi says that distressed areas appear to be some of the best buys.

The professionals at Town and Country Title Company in Pembroke Pines, Florida echo Zandi’s sentiment. According to real estate attorney, BJ Reeves, business has picked up considerably across the board.

“Business was booming in March and continues on an upswing.,” she says. “We’re seeing a considerable difference in the swiftness of short sale processing because the banks seemed to have learned how to deal with them more efficiently.”

She says that inventory has actually dropped in the South Florida market and more borrowers are able to obtain a mortgage. While lending standards continue to be tight, she is handling with plenty of mortgages and cash deals.

“I wondered if we were the only ones experiencing an uptick in business, but during a recent real estate attorney luncheon, everyone was talking about the increase in business. There was definitely a positive feeling that we haven’t experienced in quite some time.”

Town and Country’s short sale processor, Mary Behnke, is cautiously optimistic about the market.

“Short sales are certainly moving faster than in the past. Banks have gotten a little more organized and are trying to set up departments to expedite them in a more fashionable way than in the past. Some still take quite a long time, however many are being approved in six to eight weeks. “

Behnke says that although more mortgages may be coming through Town and Country’s office, lending standards continue to be tough. “ We still see more cash offers than mortgages. Banks are making it so difficult to qualify now. We’ve gone from one extreme to another.”

She is concerned future generations won’t be able to afford a home if conditions continue. “Tight standards are going to hurt future buyers if lenders don’t loosen up.”

Predicting Where the Housing Market Will Go

Economists are making educated guesses on where the housing market will go next. While still wildly unpredictable, signs point to a 25% decrease in home prices in many areas, with the exception of coastal cities such as Florida.

As the jobless rate improves, interest rates will swell, driving home sales further down. This will position cash to take a front seat to home buying as cash investors will dominate the home purchase market.

Regulatory standards will continue to play a part in mortgage lending and the industry will revert back to before the 1980’s. Instead of selling mortgage loans on the secondary market, more mortgage brokers and banks will hold the loan.

While these predications may be realized in months or years from now, Newman says that some analysts are concerned now about a double-dip recession. He is worried that among all the predications and educated guesses are empty answers.

“Economists have continually misread the housing market over the last five years, as it metastasized from a modest correction into a once-a-century debacle.”





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