This year was supposed to be the bottom for the housing market and 2012 was supposed to mark the turnaround. In reality, even the improvements sound like bad news, and some forecasters are saying we'll have another year of gloom before the clouds break.
"It's unlikely prices will rise next year in most markets," said Jed Kolko, chief economist at real estate information site Trulia. "By that measure most local markets will not recover next year, but prices are only one measure of how the housing market is doing."
American home values are likely to shed $681 billion this year, according to Zillow. That's better than the $1.1 trillion lost in 2010, but hardly worth breaking out the bubbly.
In a nutshell, that's the problem with the housing market today. Even the good news is relative, and a true recovery is still at least a few quarters away.
"[T]he unabsorbed pool of housing supply, dragging levels of consumer confidence, high unemployment and negative equity will continue to put downward pressure on the housing market, pushing our expectation for a potential recovery into late 2012 or early 2013," Stan Humphries, chief economist at real estate research company Zillow Inc., said in a statement.
Data company CoreLogic estimates there is a "shadow inventory" of 1.6 million homes, which is the biggest drag on prices.
"Foreclosures lead to very motivated sellers, which will have a destabilizing effect on prices," said Nicolas Retsinas, professor of real estate at Harvard Business School. The sluggish pace of foreclosures — hampered by the robo-signing scandal, ongoing investigations and litigation — have stalled the movement of those homes back into the market.
Data on the number of sales is more promising.
In November, sales of single-family homes hit a seven-month high. Sales rose 1.6 percent for the month, and 9.8 percent over the past 12 months.
But these figures are climbing back from abysmal depths; the National Association of Realtors thjs week lowered its figures on the number of homes sold between 2007 and 2010 by nearly 3 million, down to 17.7 million.
"With a highly leveraged housing bust, you haven't seen that increase in residential investment in spite of low interest rates," said Ted Gayer, a senior fellow at Brookings Institution.
Slack demand for existing homes also means fewer buyers for new homes. Home building has traditionally been the tow truck that pulls the economy out of the mud, but with so many empty houses and so few people moving into them, that's not the case this time around.
"It's not a demand problem," Gayer said. "When you have such a huge excess supply it doesn't really get at the problem."
Even though interest rates are at record lows, a tight credit market is keeping people who do want to buy on the sidelines, said Retsinas. Lower rates of household formation — fewer immigrants and more adult children still living with their parents — also quash demand.
Despite these headwinds, there are glimmers of hope. Kolko said an uptick in multifamily construction and remodeling, while not as strong as the traditional home building engine, will still provide construction-sector jobs in the near term. Longer term, more multifamily dwellings on the market will alleviate the increase in rents happening now, potentially giving people more breathing room to save for a home purchase in the future.
And a few parts of the country might catch a break next year. Kolko said California's Silicon Valley, along with much of Texas and New England, are starting to recover due to their employment levels or because the housing bubble wasn't as pronounced there in the first place. The rest of us will just have to hope for better luck in '13.