Housing Bottom Now Expected in 2013, Recovery Looks Weaker, by Colin Robertson, Thetruthaboutmortgage.com

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There’s been a lot of interesting housing-related news over the past week, with some good and some bad.

The first bit is that economists finally believe the national housing bottom is near.

Yes, we’ve heard that before, several times, but per Zillow, the economists surveyed are all “largely” on-board this time.

So that’s good news. The bad news is that more than half of the same respondents believe the homeownership rate will continue to fall from the 65.4% level seen in the first quarter.

In fact, one in five think homeownership will be at or below 63% in coming years, which will test the all-time low established in 1965.

For the record, some areas of the nation have already appeared to bottom, and are actually up quite a bit.

In hard-hit Phoenix, home prices are already up 12% from their bottom. In San Francisco, prices are up 10% from bottom.

But New York, Atlanta, and Chicago are still waiting for the bounce.

Housing Recovery Not Looking Too Hot

Meanwhile, future home appreciation isn’t looking as good as it once was.

Back in June 2010, Zillow-surveyed economists expected cumulative appreciation of 10.3% from 2012 to 2014.

Now, the experts only see home prices appreciating a paltry 3.5% for the same period.

That’s $1.25 trillion less in housing wealth than previously expected. Yikes.

So expect an “L” shaped recovery…in other words, a steep decline, followed by many, many flat years. Sure, it may a be “squiggly L” with little ups and downs, but an “L” nonetheless.

That said, make sure you actually like the place you buy, don’t just buy it because you think you’re going to make a killing off it as an investment.

The good news is mortgage rates continue to be absurdly low, with the 30-year fixed matching a record low 3.48% this week, per Zillow.

I didn’t see rates falling that low, so I’ll start eating my hat now.

But I still think the low rates could be a major artificial stimulus, which has led to homeowners listing the worst properties out there of late.

Why the Housing Recovery Will Take Time

If you’re wondering why the housing market won’t bounce back immediately, you merely need to consider all the ineligible buyers.

Let’s start with the millions of underwater homeowners, who won’t be able to move unless they’re rich enough to buy a new house and short sell or bail on their current property.

There aren’t many people this lucky, especially now that lenders actually document income.

Then there are those who still haven’t gone through foreclosure yet, but are hanging on by a thread.

There are plenty who still haven’t been displaced, but will be in the next several years. So there’s a ton of shadowy shadow inventory yet to materialize.

Even those who received loan modifications are in serious trouble. A recent study released by credit bureauTransUnion found that a scary 60% of those who received loan mods re-defaulted just 18 months later.

So there’s a lot of bad news that just isn’t making it to the presses, largely because we are riding the “good news train” right now in the housing world.

All of these former homeowners will also have difficulty qualifying for a mortgage in the future, so they’re essentially out of the mix.

Let’s not forget the millions that are unemployed…they obviously won’t be able to buy a home either, so this explains the dip in homeownership as well.

And it doesn’t bode well for home prices going forward. Consider that as home prices rise, more would-be home sellers will list their properties. This should keep downward pressure on prices for a long time.

It also makes one question if the bottom is really as close as some think, or even for real. We saw misleading upticks with the homebuyer tax credit too, so it’ll be interesting to see if this latest rally has legs

The Truth About Mortgage

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