Real Estate Recovery In Limbo Until 2013, Experts Say

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.

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  • by Barlow Location: Winterville on Dec 26, 2011 at 05:12 PM
    Romney has told us what he would do about the foreclosure process. He would speed it up and let "investors" buy up the foreclosed houses and "rent" them back to those who used to own them. About what you would expect from someone who made his fortune by buying up companies, laying off workers and then selling the pieces. This is someone who thinks being unemployed is a joke. Another repugnant born with a silver spoon in his mouth.
  • by ace Location: j ville on Dec 26, 2011 at 06:25 AM
    It is amazing how these experts can explain what happened after the fact but "Didn't See That One Coming". They also call it Monday morning quarterbacking. Did the government or informants lie to the public again?
  • by Anonymous on Dec 26, 2011 at 04:13 AM
    America is in limbo until Barrack Obama is voted out of office in 2012. Are you better off since he was elected? If not vote for a new president in November.
    • reply
      by obamanot/Buckofama on Dec 26, 2011 at 04:55 AM in reply to
      I like that question because 13 plus million americans will tell you Hell NO!
      • reply
        by Anonymous on Dec 26, 2011 at 07:25 AM in reply to obamanot/Buckofama
        But we have 300 million people in the US. Most of us remember that George Bush nearly put us into a full-blown depression. We are MUCH better off than we were then. Obama will win re-election.
        • reply
          by Anonymous on Dec 26, 2011 at 12:33 PM in reply to
          Average unemployment was under 6% during the 8 years of the Bush presidency. Unemployment, gas prices, grocery prices have skyrocketed during the failed Obama Presidency.
        • reply
          by Anonymous on Dec 26, 2011 at 03:42 PM in reply to
          It is time to start living in the present. Barrack Obama is up for re-election not "W".
    • reply
      by DINO on Dec 26, 2011 at 07:25 AM in reply to
      Don't get your hopes up to high. Looking at the Republican contenders, Obama's got 2012 in the bag. Our next hope is that a third political party gets their act together by 2016 because the Dems are spineless do nothings and the Repubs are far right radicals. Neither represent the interests of the average working American.
    • reply
      by Common Sense on Dec 26, 2011 at 07:26 AM in reply to
      My 401k has DOUBLED since Obama took office. It's almost back to where it was before GOP policy gutted it. I will indeed be voting for Obama in 2012.
      • reply
        by Anonymous on Dec 26, 2011 at 12:35 PM in reply to Common Sense
        Your stock is only worth the paper and print. The USA is 16 trillion in debt and counting under the failed presidency of Barrack Obama
        • reply
          by Anonymous on Dec 27, 2011 at 12:29 AM in reply to
          What specific policies are you referring to?
      • reply
        by obamanot on Dec 26, 2011 at 05:55 PM in reply to Common Sense
        Hahahahahahahaha!Why is everbody posting under anonymous and uncommon sense.Why dont you cash in on your 401K and buy so real estate?Scarey aint it?
  • by Buckofama on Dec 26, 2011 at 03:23 AM
    We need more disasters like the tornados in bertie county,tuscalusa and more hurricanes like irene.That is the only thing that has kept alot of busnesses afloat under this devistaing obama depression.All of these jobs are payed for by insurance and or fema.Rich people aint spending money due to the uncertainties of the hate the rich obama policies.
    • reply
      by Anonymous on Dec 27, 2011 at 12:25 AM in reply to Buckofama

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