Some economic experts and analysts contend that there is little chance for a housing recovery. That extremely pessimistic outlook is not based on feelings, but upon solid economic data. The year of 2011 was a sad story for the housing market. The market saw record low 30-year mortgage rates with few people taking advantage of the rates to buy new homes. The New Year is likely to bring much of the same. Doug Duncan, vice president and chief economist at Fannie Mae, contends that there might be a slight uptick in houses sold but the home prices likely will be down. This means that although more houses will be sold in 2012, the total amount of money spent on purchases is likely to be the same as in 2011.
Despite the fact that the Federal Reserve has pledged to keep rates low through 2013, many content that because of the high unemployment and the historically low home prices, there will be no recovery of the housing market for the foreseeable future. Last year saw a total of $1.3 trillion in home lending, which is down from $1.7 trillion in 2010 and $3.3 trillion in 2005. Another disturbing figure is the fact that much of the $1.3 trillion in home lending last year did not result in new home purchases. Approximately 4 out of 5 mortgage applications were for refinancing current mortgages. Borrowers were taking advantage of the historically low rates, which averaged less than 4%, not to purchase new houses, but to refinance their current homes.
Not all analysts predict such doom and gloom for the housing market. Others are optimistic about the future of the market. Former top economics advisor to the White House and Wells Fargo & Co., Sung Won Sohn states, “Housing has hit the bottom and has begun to heal slowly.” The events that have taken place over the past few years have “set the stage for a rebound” as Sung contends. Whether or not we are to see a recovery in the near future most would contend that given the extreme damage that was inflicted on the housing market any form of recovery is likely to be slow.
E. Scott Reckard, Low mortgage rates likely to continue through 2012, experts say, https://www.latimes.com/business/la-fi-mortgage-rates-20120103,0,2240865.story (accessed 12/4/12)