- The 2013 Housing Market: How Is It Being Affected by the Economy and the Fiscal Cliff?
- February 21, 2013 | Author: Keri Ebeck
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Pittsburgh Office
The year 2012 brought several uncertainties for the United States economy: the debt ceiling, the unemployment rate, the election, and the inevitable "fiscal cliff." As the country begins a new year, some of the uncertainties of 2012 have been resolved, proving that 2012 may lead to 2013 being a year of stability, slow growth and opportunity for the U.S. economy.
The housing market is the center of growth for the economy. For most Americans, their biggest and often only asset is their home. In 2012, U.S. home values increased by 5.9% from 2011. The average home in the U.S. value increased to $157,400.00 in the last quarter of 2012.1 "For 2012, Census/HUD said an estimated 367,000 new homes were sold, a 19.9 percent improvement from 2011 (306,000)."2 According to Joel Kan, director of economic forecasting with the Mortgage Bankers Association, "home sales will see a gradual increase through 2013, but with such low inventory, there is more upward pressure on home prices and we may see a more significant increase in prices over the next couple of quarters,"3 with home sale prices increasing, the average American's home that had little or no equity, may soon be out of the water and become an asset to homeowners.
What does this all mean as far as what we can expect in 2013? The combination of housing inventory demands and increase in home values provides the average homeowner hope and confidence that their once depreciating home may prove to be an asset with continued growth. Zillow.com's Chief Economist Stan Humphies stated that "strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values...."4 In its 2013 revised forecast report, Fannie Mae expected the overall home value and sales growth to carry over into 2013. Fannie Mae's Chief Economist Doug Duncan stated, "we expect the fiscal policy climate to act as a drag on growth this year... as fiscal policy debates subside later in the spring, we expect to see some upward trend in economic activity."5 Fannie Mae did make it a point to state that "the housing sector, which has become a 'bright spot' in the economy since home prices began to rebound in 2012, is expected to provide a rising contribution to GDP in 2013."6
While the gradual rebound of the housing market is a positive sign, it should be noted that the recovery will be very slow and below what is normally expected for a recovering economy. In January 2013, Lender Processing Services in Florida issued a report showing that the total U.S. delinquency rate rose in December 2012 by 7.17%, but the loan delinquencies were down overall for the year by 9.11% from? 2011.7 While most of the country is recovering, states such as Florida, Mississippi, New Jersey, Nevada and New York are still feeling the crunch of foreclosures; but with slow growth, will come slow recovery. As the country recovers from the recession, the crash of the housing market and the fiscal cliff issues there will is "an improvement in the negative equity situation and you have a reduction in the amount of people in the default bucket."8 The growth and recovery of the U.S. economy greatly depends on final resolution to the fiscal cliff and debt ceiling issues. Only by addressing these issues and coming to final resolution will the housing market be able to fully recover, but it will be a long and very slow recovery.
1 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=36618. January 2013
2 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=26603. January 2013.
3 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=36508. January 2013.
4 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=36618. January 2013.
5 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=36588. January 2013.
7 www.mortgagebankers.org/tool/FullStory.aspx?ArticleId=36618. January 2013
8 www.bloomberg.com/news, January 2013.