By Kevin Chiu
Despite near record low mortgage rates, home prices in the over-whelming majority of the U.S. will decline during 2012 as a tough employment market and weak economy hamper the nation’s housing market, pushing home prices lower by an average of 3.9%, according to a new Housing Predictor forecast.
A handful of economic programs implemented by the Obama administration have made little impact on the hurting U.S. housing market, despite government tax incentives for home buyers and a series of other efforts. Refinancing mortgages and reducing the amount of mortgage principal owed by homeowners underwater on their homes may be the only course the government has to take to improve the economy.
A similar program put into effect during the Great Depression by the Roosevelt administration eventually saved the U.S. housing market from collapse and revived the nation’s economy. The program was part of the Glass-Steagall Act and was issued as an executive order without Congress. A similar order could be made today by President Obama without Congressional approval through a presidential executive order.
Few real estate analysts expect any meaningful action on the housing front to be taken, however, until after the 2012 presidential election as political differences between Democrats and Republicans divide the nation through bitter meaningless partisan politics and halt any sort of agreement to aid the nation’s economy from additional hardship.
In the mean time, millions of Americans suffer through foreclosure as a result of being unable to afford mortgages that became too expensive to afford, underemployment, unemployment and walk away from their homes after giving up on any hope they will see their homes value recover during their lifetimes.
Unemployment, which averages 9% across the U.S. and is in the high 20% range in many areas of the hardest hit areas of the nation, provides little hope for a housing recovery for several years.
Foreclosures have already amassed a record volume of homes that have been formally repossessed by banks and mortgage companies and are expected to grow in 2012. An additional inventory of homes that are regarded as being in the shadow housing market and not yet counted as being in the foreclosure pipeline, will only add to the ailing foreclosure crisis during the year.
The shadow inventory is estimated to be between 4.4 million and 7 million residential properties, not including multi-unit investor units depending upon which real estate data firm’s figures are counted. Conservatively, at least 1.2-million residential foreclosures are expected in 2012 in the U.S. alone. The areas that experience the highest volume of foreclosures also suffer the largest decline in home values.