How Did It End? Grading the 2012 Housing Market
2012 was a better year for the housing market. Both home sales and prices increased, while mortgage delinquencies, foreclosures, and short sales all decreased as compared to the year before. But just how many strides did the market make? Here’s how our report card stacks up:
Existing Home Sales: B-
Monthly home sales rose 7% across the nation in October and November. That's especially impressive considering the national percentages were affected by slow growth in the Northeast, where Hurricane Sandy affected new construction and existing home sales. Despite the natural disaster, that region of the country still saw a 3% increase in home sales in October and November. In November, a total of 5.04 million homes were sold nationwide. That's the highest level since November 2009. And, as an added benefit, foreclosures and short sales now make up a much smaller share of overall sales, making way for more “conventional” home sales. These are all reasons we give existing home sales a B- grade. This part of the housing market made great strides in 2012, and should continue to see gains in 2013.
New Construction: C-
In a report recently released by the National Association of Home Builders, the association's chief economist David Crowe was cautiously optimistic about the future of the home construction business. Crowe stated that positive reports on housing starts, permits, prices, new-home sales, and builder confidence all point towards a slow but steady housing recovery. Yet he warned, “Stubbornly tight lending standards for home buyers and builders, inaccurate appraisals and proposals by policymakers to tamper with the mortgage interest deduction could dampen future housing demand.” Crowe and other economists at the NAHB predict that single-family home starts and new-home production will both increase significantly in 2013. They estimate that single-family home starts will climb to 534,000 units this year, up 23% from 2011. The NAHB is also forecasting that single-family new-home production will post a healthy 21% gain in 2013 to 647,000 units. Multifamily housing, meaning condominiums and townhomes, are also expected to see an increase in production (16 percent gain in 2013 to 270,000 units) and starts (anticipated to rise an additional 9% percent in 2014 to 294,000 units.) in the next two years. The report from the NAHB also reports that builder confidence is up to 47%. They'd like to see that figure increase to 50%, meaning that an equal number of builders view the market as good and bad. All of these statistics show that the new construction business is improving, but the lack of builder confidence is the reason we gave the facet of the housing market a C – grade.
Delinquency and Foreclosure Rate: B +
In November, 10.63% of all U.S. mortgages were either delinquent or in foreclosure. That's down only slight from October, when that number sat at 10.64%. But, the combined delinquency plus foreclosure rate is at its lowest level in four years, so that’s definitely good news for the housing market. Not only does it mean that fewer homeowners are losing their homes, but fewer distressed properties on the market means that median sales prices will continue to increase in the year to come.
Overall Housing Market: B-
Clearly, the above-mentioned statistics in each category show that 2012 was a year of improvement across the board, but they also show that these trends need to continue in 2013 and beyond if the housing market is truly going to fully recover. Economists agree that 2012 was a year of improvement, but they also agree that we have a long way to go before America’s housing market can be deemed “back to normal”.
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