There is optimism for the housing market in 2012. It may not reach the pre-recession numbers, but the theory is they are on the rise. At this point any improvement in the real estate market would be welcomed with open arms. Housing prices will stop sinking this spring. The process will be gradual and we won’t see much of a change in the economy in 2012.
Home prices have dropped an average of 31% and will drop an additional 2% in early 2012, but they should recover by the year end. In 2013 it is anticipated that the market will increase around 3% – 4%.
An indicator that the bottom is finally near, is the change in the ratio of average home prices to personal income. Houses are affordable again. During the housing boom they were 4 to 1, the ratio is now well below the long-term average of 3 to 1.
New home construction starts will increase by 15%, although a large portion of that will be from apartment buildings. New construction will only be around 750,000 in 2012, in 2005 it was 2 million, and still falling far below the pre-crash average of 1.5 million from 1959 through 2006. However it will be an improvement from the current state the start of new construction is in.
By 2014 it is expected the housing market will be starting to look more like its old self. Housing starts will be nearer to the long term average of 1.5 million a year. The long awaited view of the housing bottom is finally getting closer and we can start to be hopeful and even a little excited about what is to come.
