Housing and Economy Forecast by NAR – Outlook Optimistic for 2012 and 2013

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(Best Syndication News) - The National Association of Realtors (NAR) is forecasting a positive economic recovery for the next two years. The economy will not be back to the pre-recession levels, however the trends are looking better for housing and employment. The unemployment numbers will still remain high, the report suggested. The NAR said there were slight gains in the real estate marketplace, but there is still a ways to go.

The number of newly constructed homes crumbled during the recession and hit a low in 2009, with an ever so slight increase in 2010 and 2011. The NAR forecast predicts a slight increase again in new home construction, but anticipates that 2013 will be around half the volume of 2005. The NAR based their forecast on the population growth of 3 million each year, but mentions that it has slowed down to 2 million in 2011.

Economists suggest that 1.5 million housing units need to be built yearly to keep up with population growth, and the historical average reflects this same figure. Housing starts have been hovering around 500,000 units, far below the average. Because of this, the NAR predicts gains in new housing starts, especially with multi-family housing units. These property types are anticipated to have a stronger recovery in the coming years because of the high demand for rentals.

Existing home sales have been relatively stagnant from 2008 through 2011. There were 4.25 million existing home sales in 2011. In 2010, there was 4.18 million sold, and in 2009, there was 4.34 million homes sold. The hardest hit year was 2008, when only 4.12 million existing homes sales were reported. The NAR forecast predicts that in 2012, 4.45 million existing homes sales will occur, while in 2013, they anticipate 4.68 million sales. This is still a long way off from the peak in 2005, with 7.08 million existing homes sold.

Median home prices will remain low in the NAR’s 2012 – 2013 forecast. Housing inventories remain high, meaning that housing prices will stay low. They anticipate a slight increase in both new homes and existing home sales. The new home median sales prices will be about the same as 2008 values in 2013, around $234,500. The existing home median price is not recovering quite as well. The NAR forecast estimates the median price for existing homes to be around $171,800, which shows an ever so slight increase in value from 2011’s median price of $165,200.

The 30-year fixed interest rates may still go down in 2012, according to NAR forecast. The 30-year mortgage interest rate in 2011 was 4.5 percent on average. The NAR forecasts the 30-year mortgage interest rate for 2012 could drop down to 4.3 percent. However, the forecast for 2013 is at a 4.9 percent interest rate for the fixed rate 30-year term.

The NAR also forecasted the payroll job changes. In 2008 and 2009, there were millions of jobs lost. In 2010 and 2011, there was a positive increase in jobs. NAR forecast suggests that 2012 will be a slight improvement from 2011. In 2013, the forecast expects an increase of over 2 million new jobs to be created. The NAR anticipates the unemployment rates to drop down, with 2013’s forecast at 8 percent. This is still much higher than 2007’s unemployment rate of around 4.5 percent.

With any forecast, the numbers are not a guarantee that these things will occur. The NAR uses existing data to calculate their forecast. The good news is that based on the current trends the economy appears to be showing signs of recovery.

By: Dave Reddy

ref: NAR Economic Forecast Report December 29, 2011

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