From RISmedia and fanniemae.com:
Thanks to strengthening in consumer spending and growing policy clarity at the end of 2010, the economy is finally poised to accelerate and sustain above-par, less volatile growth, according to the January 2011 Economic Outlook released by Fannie Mae’s Economics & Mortgage Market Analysis Group. The economy is expected to grow by 3.6% in 2011, compared to an estimated 2.8% in 2010. The group expects some increase in housing activity during 2011, however, a growth-oriented view of housing is not expected until 2012.
“The economy has regained momentum entering 2011 and we see significant improvement in the economy’s ability to grow compared to 2010,” said Fannie Mae Chief Economist Doug Duncan. “We expect a small rise in home sales this year, but significant amounts of supply and shadow inventory of expected foreclosures will continue to hamper a robust housing picture for some time.”
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Other comments found at fanniemae.com:
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After controlling for age, income, wealth and a number of other factors, regression analysis indicates that married couples are 2.5 times more likely to own than other respondents.
- Having children is cited as a major reason to buy a home by approximately three quarters (76 percent) of all households.
- The immigrant population in the U.S. is projected to grow by nearly 130 million people over the next 40 years, according to the U.S. Census Bureau.
- Sixty-six percent of respondents say they believe that housing is a safe investment – as safe as a savings or money market account.
- More than half say they believe that owning is a good idea, even if they plan to stay in the home less than three years.
- Eighty-six percent identify tax benefits as a reason to buy, even though tax benefits are small or non-existent for many homeowners.
- The substantial majority of homeowners (89 percent), as well as nearly half of renters (44 percent), believe they would be better off owning their homes, given their current financial situations.
- The housing crisis has had the greatest impact on younger Americans. Since the housing crisis, homeownership for those 25 to 29 years old has declined 10 percent since peak rates, compared with a decline of 5 percent among those 35 to 44 and less for those 45 and older.
“Our research helps us better understand the views of homeowners and renters across specific demographics, ethnicities, and regions so that we can provide the best support possible for the market.”
– Doug Duncan
Vice President and Chief Economist
“We expect a small rise in home sales this year, but significant amounts of supply and shadow inventory of expected foreclosures will continue to hamper a robust housing picture for some time.”
What hampers is you NOT releasing more homes into the market and “nothing that price can’t fix”
I’m beginning to wonder if buying a house is even worth it. If prices stay flat (or drop) for the next 10 years. I can make a better return on investments + stay liquid. What would happen to fannie/freddie if a large mass of people all started feeling the same way.
I’m with shadash!
That’s the point houses will be something you live in and not an investment!
Shadash,
I have a hard time believing housing will drop for the next 10 years on a nominal basis. There might not be strong appreciation, but at least close to inflation is highly likely in coastal California.
I don’t expect interest rates to budge above 6% for at least 3 years. It might change, but I doubt it.
While there are risks involved, buying a home now represents a much better likelihood for a good resolution than it did 5 years ago.
I would bet that anyone buying a home now will not have negative equity 10 years from now unless they take money out or destroy their home.
Chuck
Here’s my take in the buy versus rent calculation:
Assume flat prices in the short to medium term. So, basically, is the total monthly cost of owning (payments, HOA fees, insurance, taxes, Mello Roos, property taxes, repairs, any investment profits lost from your down payment, minus tax benefits) less than rents? If no, are you planning on staying put so long (a decade or more) that price increases become a factor (especially if you plan on staying put so long you pay off the house)? If no to that too, rent. If yes to either, buy.
Now, there are non-economic reasons to own a home (no landlord to deal with, ability to remodel, emotional “stability” reasons); those aren’t factored in the above calculation.
Nicely stated Geotpf. I have come to that same equation/analysis over the last few years.
If the last 5 years has taught us anything, it is that Fannie Mae (and Freddie Mac) certainly know how to hamper housing.
I agree with the article. I hope everyone does rent because as a landlord, that’s what I like to hear. I think prices are going to follow inflation. Im not so negatitive as folks here.
Stan,
What if inflation = 4-6% but, you can get 10% with investments and remain liquid?
Remember to deduct the 6% realtors fee from your final sale price.
Also remember to account for your time spent managing leaky faucts and toilets.
* Overall I think you’re going to do alright with houseing as an investment. Government + the fed has made homeownership a protected class.
Shadash,
I do not and never will invest in any stock. I have money in CD’s and Real Estate and that’s it. I never will sell. I’m strictly as cashflow and never did care what the price goes up too. I’m weird like that but heck it’s done me well in my life.
Good luck to you.
“I think prices are going to follow inflation. Im not so negatitive as folks here.”
I think prices will follow wages and interest rates. Who cares about inflation if you can’t meet the underwriting standards based on the monthly payment and your income. Wages and interest rates are the primary factors for new household creation.
Actually if food prices and gas prices inflate as they have been it might be a negative for home purchases but we’ll have to see if there’s any response to those factors from the banks and/or fannie/freddie.
I know NCC is holding up well so far, but we just saw a big month v month decrease in median home prices for San Diego County. We better get a good spring selling season that pushes us back over the recent highs in median prices or we might be in for that second leg down.