Is it premature to say the housing market is in recovery?

Lately we have seen several reports on the housing market that show the housing market is improving and may even be headed toward a recovery however some experts, including Cliff Rossi, Tyser Teaching Fellow and executive-in-residence for the University of Maryland’s Robert H. Smith School of Business, say it may be premature to call this a “real recovery.” Rossi is not entirely negative on the housing market and does admit that home prices are stabilizing and inventories are declining, however he has concerns as a result of the “fiscal cliff”, regulatory reform and tightness of credit.

Some of the other points made by Rossi, both good and bad, about what 2013 holds in store for the housing market include:

• The lack of availability of credit for homebuyers is a concern as is whether or not there will be additional efforts to help underwater homeowners.
• One ray of hope is in the Fed’s commitment to keep interest rates low throughout 2013
• The economy is expected to remain sluggish which will put a damper on demand for homes.
• Housing vacancy rates are dropping, which is good, now at 2.1 percent which is above the “norm” of about 1.5 percent, but below the peak of 3 percent at the height of the housing crisis. Estimates say 1.5 million new housing units are needed annually to accommodate population growth and new household formation so, with only 600,000 housing units built last year, inventories are continuing to drop and take pressure off the market.
• Credit remains accessible to borrowers with strong credit history, stable income and employment, but you should “expect to bring a 10-20-percent down payment to the closing table – or more – as lenders continue to maintain high underwriting standards for this important risk factor,” Rossi says. “
• Expiration of the Mortgage Debt Relief Act of 2007, which has facilitated short sales and thus has helped move distress inventory off the market, “could have more than just a chilling effect on a weak housing market”, according to Rossi

 To see what 2013 holds in store for the St. Louis Real estate market (at least in my opinion) be on the lookout for my 2013 forecast here later this month.

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