Housing market outlook for 2012.

• Author: McCoy, Douglas M.
• Position: Industry overview

The housing industry continues to creep through the quagmire created by an inflated and leveraged economy hoping to find solid ground. Comparing current activity to its same period a year ago, economists generally agree the industry has hit bottom. On the other hand, there are still many challenges such as anemic job growth, a large inventory and strict lending standards.

U.S. Housing Industry

Job growth and consumer confidence are the primary economic drivers for bringing potential buyers to the market to take advantage of attractive credit terms and attractive housing prices; however, economic conditions remain weak, slowing a recovery. The following is an excerpt from an October 28,2011 article published by the National Association of Home Builders (NAHB).

Economic conditions are expected to remain weak, slowing the housing recovery but not derailing it At its Sept. 20-21 meeting the Federal Open Market Committee (FOMC) projected slower growth for the second half of 2011 and into 2012, based on weakening labor market conditions and consumer and business sentiment. The Oct. 19 Beige Book from the Federal Reserve depicted a slow and uneven economic recovery, with most bank districts reporting either weaker or less certain business outlooks. (1) The big question as we approach the end of 2011 is whether the housing slump has indeed bottomed. Sales of new single-family homes are forecasted to rise 4.5 percent in the third quarter of 2011 to a seasonally adjusted annual rate of 304,000 units, according to data released by the National Association of Realtors[R] (NAR). This increase follows downward revisions to the sales rate for the previous four quarters. The annual seasonally adjusted rate forecasted for 2011 is down 4.7 percent compared to 22.6 percent in 2009 and -14.4 percent in 2010.

Total existing-home sales--including single-family, townhomes, condominiums and co-ops--dipped 3.0 percent to a seasonally adjusted annual rate of 4.91 million units in September from a level of 5.06 million in August, but this is 11.3 percent above the 4.41 million-unit pace in September 2010.

The median price of existing homes sold in September was $165,600, down almost 3.9 percent from a year earlier. According to the October report from RealEstateabc.com, the median price dropped to $244,100 from $245,600 in July for the Northeast, and it fell 5.1 percent since August 2010. In the Midwest, the median price declined to $141,700 in August from $146,300 a...