Thursday, May 3, 2012
Buying a home won't get much cheaper
With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable -- but it won't stay this way for much longer. Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year. A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.
Some economists, like Trulia's Jed Kolko, expect home prices to pick up even more quickly. Trulia's data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.
Mortgage payments at lowest level in decades
"This is a strong indicator that we will start seeing home price indexes, like the S&P/Case-Shiller, start to report home price increases this summer," he said. Prospective homebuyers who've been sitting on the fence shouldn't worry if they aren't quite ready to make the leap. Analysts are predicting that the initial price gains will be modest, at least, in most markets. Hoffman, for example, is forecasting a 2% increase in 2013 compared with 2012. Meanwhile David Stiff, chief economist for Fiserv, predicts that prices will turn in the last quarter of 2012 and will rise 4.2% for the 12 months through September 2013.
Foreclosures start to fade
One major factor that will drive the trend is the cooling of the foreclosure crisis. Stan Humphries, chief economist for Zillow, said that the percentage of mortgage loans 90 days or more late, a good predictor of future foreclosures, is "falling fast." That percentage dropped 15% year-over-year to 3.1% through the end of 2011, according to the Mortgage Bankers Association. And the decline is accelerating: More than 70% of the decline came in the last three months of the year.
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