Certainly the housing market is one of the most watched of all economic indicators. Strong home sales trigger other economic activity from increased labor requirements to furniture sales. While the housing fiasco of the previous decade was the driving force for the Great Recession it’s quite possible that 2013 will provide perhaps a taste of housing recovery. While no one can accurately predict the future there are two things we do know: home prices have begun to stabilize nationally and interest rates will remain low.
As home values began to slide dramatically from 2007 to 2009 there have been incremental gains in home prices in select markets. All real estate is local and as one community can appear to recover lost equity still other areas can still be mired in a financial funk. Yet the most widely recognized index measuring home prices, the S&P/Case Shiller Index, reported that values nationally are indeed on the rise.
The most recent reported third-quarter 2012 numbers showed a relatively large 3.6% increase in home prices compared to the same period in 2011. Home values exhibited their largest gains since the second quarter of 2010 and have experienced increases in values for four straight months.
Helping these values is the significant drop in foreclosures to a five-year low, indicating “bottom feeding” is tapering off as prices stabilize.
These numbers are being assisted by low interest rates still available in today’s markets. 30 year mortgage rates at the beginning of 2012 were in the then-record 4.25 percent range. As 2012 came to a close, those same 30 year mortgage rates dropped to new lows at 3.50 percent.
Continued Fed intervention was announced in October of 2012 to the tune of some $40 billion in mortgage-backed security purchases in addition to a recently announced $45 billion in government bond purchases. This $85 billion monthly investment will continue until the Unemployment Rate falls to 6.5%.
With low rates in store for 2013 and home sales slowly beginning to thaw this combination indicates an increasing demand for real estate nationwide. This turn in valuation along with cheap money might just provide the economy the spark it needs. What we all need right now is an economic rebound. A strong one. And if you’re in the market for a home, the time to buy might be now.
David Reed is a published author and columnist with expertise in the real estate, financial, investment, consumer credit and mortgage industries with more than 20 years of hands-on experience.