Welcome to the back to the future moment of housing. We officially landed in 2002. Only, we don’t get to ride around in a DeLorean. House prices have officially returned to their 2002 levels on average across the country. That is a 34.4% average decline across the country. According to the S&P Case-Schiller Home Price Index, eight new cities hit new lows. Only three cities posted month-over-month gains. Fortunately, those in the Washington, DC market were among the fortunate few, up .7% compared to December. However, that is still equal to May 2004 levels and down 2.1% compared to December 2010. There are several dynamics in play that are currently impacting the pace of recovery in the market. There are still many anticipated and current foreclosures that must get through the system before and supply and demand dynamics can be restored to more favorable levels. In addition, with the economy still in slow recovery mode, many people are still not in position to be able to buy a home regardless of their desire. According to a survey released by Fannie Mae, home ownership is still a goal for most Americans with two-thirds of renters saying they intend to buy someday. In most markets, the trend has reversed from the peaks in 2006 where renting is more expense than owning a home.
2010 was quite an up and down year for residential real estate. Home Sales were spurred on in the first half of the year by the homebuyer tax credit but through October, most hope for a 2011 trough in housing prices seems to have been pushed out to 2012. A glut of foreclosures still have not been released on the market and while housing starts are down, overall inventories remain very high. Most experts are predicting additional price declines between 6% – 9% for 2011. Interest rate predictions for 2011 have been somewhat mixed. Some believe rates will remain below 5% while the others believe rates will be over 5% by the end of 2011. The homebuyinginstitute.com summarizes various predictions from economists and real estate companies on a continually updating list. Continue reading »