For the "information junkie" who anxiously searches for any glimmer of an economic recovery, 2012 may prove to be a classic "good news-bad news" scenario. If you follow the news feeds, there is definitely no shortage of stories to bolster the position that the housing market is still a mess.
On many fronts this may be accurate; but, by widening out the angle of the lens, one may find it is not all doom and gloom.
There is no denying that the housing market has been undergoing an unprecedented market correction. However, we may be at a point where the return on investing in housing may finally outweigh the risks. It appears housing prices may finally be nearing the bottom. This proposition is supported by both the Case-Shiller index which predicted the bottoming of home prices in 2012, and Zillow which pointed at 2012 as the housing industry's lowest point.
While both of these sources are basing their hypothesis on strategic metrics, there are additional indicators that support their position. For example, key cities on both coasts have experienced investors coming into the marketplace to pick up prime pieces of real estate, and not necessarily at "fire sale" prices as the competition has been robust, especially in the multifamily market.
While prices have been freefalling and people have been hesitant to invest, the demand for rental property has been consistently rising. Though we may not like the current reality, it appears we may be destined to be a nation of renters, at least for the short term.
The loss of middle class wealth combined with a generation of college graduates drowning in debt have resulted in a sizeable population that consider renting a home as their only option. The increased need for rental properties may ultimately help stabilize the housing market. GSEs are currently looking to address this issue through foreclosure relief programs that convert REO properties into rentals. If this comes to fruition, it may help curtail further loss of property values. We believe this may be a viable alternative for effectively managing the growing population of REOs and we hope it does not get lost in political maneuvering.
For those people still interested in entering the ranks of the "homeowner," the process of obtaining credit for a home purchase is not for the faint of heart. Many potential borrowers are looking to small originators and credit unions as they provide more flexibility in their loan offerings. Generally, these institutions had reasonable underwriting criteria and consequently have been unfazed by the overreaching standards that some of their larger competitors have adopted. They understand the value of a strong bond and banking relationship with their clientele and have not been burdened with countermanding the negative public perception of some of their larger competitors.
As everyone knows, 2012 is an important election year. Typically, election years are a time of great fanfare and coalescing around grand plans that will fix all ills. This year is showing itself to be different. Our political candidates are staying as far away from discussing a cure to the housing crisis as they can. It appears they know there is no short-term fix, the problems are multidimensional and throwing money at the problem is just that...throwing money.
So, as 2012 progresses, keep in mind it will be a mixed bag of good and bad news. But, we feel confident that measurable recovery is probable.
Diane Gozza is the executive vice president of business development of Integrated Mortgage Solutions, Houston TX.