Rising home prices across the country are giving a long-awaited boost to the housing market, but fiscal uncertainties could make the recovery a “bumpy ride,” according to economists who spoke this week at a webinar sponsored by the National Association of Home Builders.
Builders continue to experience challenges in obtaining credit for new projects, and potential buyers are also still struggling to qualify for mortgage loans due to tightened underwriting standards in place the last few years. The economists also cited the challenges of appraisals coming in lower than the agreed-upon sales price and a limited inventory of developed lots in certain housing markets. Another factor potentially jeopardizing the speed of the recovery, the economists added, are pending tax increases and spending cuts that are set to take effect in January.
Despite the challenges, the economists mostly remained optimistic about the outlook for the real estate market. Mark Zandi, chief economist for Moody’s analytics, forecasts that mortgage rates will stay low, the availability of housing credit will improve as private mortgage lending picks up, and the job market will gain traction as policymakers resolve fiscal issues and the uncertainties facing the market.
Robert Denk, NAHB’s assistant vice president for forecasting and analysis, said that nationwide housing starts are projected to return to 55 percent of normal production by the end of next year, and reach 70 percent of normal levels by the end of 2014. The hardest-hit housing markets — such as Arizona, Florida, Nevada, and California — still have a long way to go for making up appreciation losses during the housing crash. However, energy-producing states — such as North Dakota, Texas, Oklahoma, Montana, and Wyoming — are expected to return to normal levels in housing production by the end of 2014, Denk said.
Source: National Association of Home Builders