Real Estate Market on Slow Track to Recovery

November 22, 2011 / Russell Legato, Residential Property Analyst

When 20,000 Realtors met at an annual convention in Anaheim, California, there was a festive air. The talk was about the real estate market starting to pick up. Real estate is recovering from the huge crash experienced. But, talk is talk and statistics are reality. Statistics show that it may be a little better, but, the recovery will be slower than the happy mood indicates.

Real Estate Market on Slow Track to Recovery

The National Association of Realtors predicts the sale of homes will increase by 1 percent in 2011 and four to five percent in 2012. Five million homes were sold this year, which is better than last year. But, compare that number to the sales in 2004, 2005 and 2006. In those more productive times, seven million homes were sold annually.

At the Anaheim convention, the NAR released some new predictions. The rebound will not be quick. Number of sales will increase, but gradually. In the meantime, 250,000 realtors have been forced out of the real estate business.

Another factor to be considered is the number of foreclosures expected over the next two years. Millions of homeowners are having trouble meeting their mortgage payments now and foreclosures may be high. However, news that the number of sales are rising is certainly a good sign the economy is recovering.

The economy is affected by the housing market. Homeowners worry about another drop being possible. When the housing market is stabilized it will reassure those homeowners and they will feel able to spend more money for living expenses. That will create a big economic upturn.

There is a record low in new homes being built and sold in 2011. As for mortgage rates, 30 year mortgages are 4 percent and expected to increase to 4.5 percent in 2012. Economists predict a rate of 4.8 percent in 2013. In 2014 there will be a significant increase, as high as 5.5 percent.

It is puzzling that more people are not out buying homes while they can take advantage of the low interest rates. It may be that mortgage loans have stringent qualifications required for all mortgage loan applicants.

That’s the reason more homes are not being sold even though the low interest rates should be encouraging more sales. That’s how one industry, the real estate market, has a major effect on the economy.

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