CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.
In the first release of CoreLogic’s new MarketPulse newsletter Wednesday, Fleming explained his rationale for such an assessment.
He notes that housing is an industry with long business cycles. Regional housing recessions have typically taken anywhere from three to five years to find their bottom, and Fleming says the national housing recession has behaved similarly in that it has bounced along a bottom for the past two years.
Fleming points out that housing affordability is rising dramatically due to a combination of home price deflation and rock-bottom mortgage rates. In fact, he says, after adjusting for inflation, this has been a “lost decade” for housing as prices are the same as at the beginning of the millennium.
“The time is right in 2012 for prices to begin growing again,” Fleming said, “and housing affordability will put a floor under any further significant declines.”
Fleming says he will be watching the spring and summer buying season closely for positive signs of demand.
He points out that households are paying off their debts and at the same time accessing credit more easily, with some even adding Home Equity Lines of Credit in the third quarter of last year – the first such movement for these second-lien mortgage products since the financial crisis began.
Fleming cites a quarterly survey by the New York Federal Reserve Bank, which shows total household debt continues to decline. At the same time, consumer sentiment rebounded strongly in the latter part of 2011, posting a six-month high in December – an indication that consumers’ confidence in the strength of the economy is growing, according to Fleming.
Most housing statistics basically moved sideways in the latter part of 2011, but Fleming finds several positives in the numbers. Although market indicators are coming off of very low levels, he notes that both existing-home sales and single-family housing starts have begun to increase, homebuilder confidence is improving, and affordability is at an all-time high.
Putting all of these statistics together suggests that while there is a very long way to go, the housing market is likely to sustain these upward movements in 2012, according to Fleming.
“While we cannot say with a high degree of certainty what 2012 has in store for us, indications based on the latter part of 2011 are that both the broad economy and the housing market are moving toward positive growth in 2012,” Fleming said.
He concedes that some impediments do exist, including slower global economic growth, a recession in Europe, and fiscal and political uncertainty in the United States.
But Fleming says when you look at the big picture, “we are bullish on the prospect of improving economic performance in 2012 from 2011.”
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