The million dollar question is has the U.S. housing market hit rock bottom yet or not? While there are no sure shot answers to that question, all the economic indicators seem to predict that the market would start crawling upwards this year.
According to Fannie Mae, the largest U.S. mortgage buyer, home prices would probably start going up in the third quarter of 2011 and rise 0.6 percent for the year, which is the first annual increase since 2006. Also, based on the median forecast of 30 economists at a symposium of the Federal Reserve Bank of Chicago last month, the real residential investment, which is an inflation-adjusted measure of homebuilding, will increase 9.6 percent in 2011 after five years of declines to a record level.
Housing demand, which is another key indicator of this segment’s health, is considered to have a good chance of stabilizing this year, albeit not at a consequential level. But considering that it had plunged last year, this is certainly good news. Also, according to estimates made by the National Association of Realtors and the Mortgage Bankers Association, construction and home sales will rise in every quarter of 2011.
Experts caution however, that it is too early to rejoice because this predicted uptick is anemic at best and it is not going to give any significant boost to the economy or cause a sustainable turnaround because we are coming off 50-year lows and we continue to deal with the foreclosure fiasco.
Just last week, the Massachusetts Supreme Judicial Court upheld a judge’s decision that two foreclosures were invalid because the mortgages were improperly transferred between securities. Are these just two isolated cases or are they the proverbial tip of the iceberg? Only time will tell.
If unemployment keeps improving and if the economy continues on its slow path to recovery, the gains in jobs and income will increase the pool of qualified home buyers and this may slowly bring a measurable turnaround and an eventual recovery in the housing market.
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