Housing Market Risks and Strengths
There are several reasons to be hopeful about the U.S. housing market in the months ahead, according to CUNA Senior Economist Steve Rick:
• Thirty-year mortgage rates are low, averaging 4.5%;
• Falling home prices have led to record levels of housing affordability;
• Private sector job growth has improved; and
• Public and private foreclosure mitigation efforts are reducing the number of foreclosures and decreasing the market’s housing supply.
But dangers still lurk on the horizon:
• Expiration of the housing tax credit in April. That pulled forward a lot of home buying that would have taken place during the second half of this year. That could lead to weaker second-half sales.
• Rising foreclosure sales. “We expect 2.5 million homes will be put on the market in 2010 due to foreclosures,” Rick says. “More homes on the market will lead to a further reduction in home prices, which will lead to more Americans owing more on their homes than their homes are worth.”
• Buyers will expect lower home prices in the future. This will delay their purchase decisions.
• Unforeseen events, such as war in the Middle East, could cause a double-dip recession that could lead to a housing market crash.