Real estate economists and analysts are increasingly optimistic that the housing market will have a dramatic recovery in the next two years, according to results of a new semi-annual survey of 38 real estate economists and analysts conducted by the Urban Land Institute’s Center for Capital Markets and Real Estate.

The economists predict that the national average for home prices will stop falling by this year and a subsequent turnaround will occur. By next year, they project that home prices will begin to rise by 2 percent, and then get a larger boost of 3.5 percent by 2014. The economists also predict that housing starts will nearly double by next year.

They also foresee rental prices continuing to increase for all property types, ranging from 0.8 percent to 5 percent.

The economists’ predictions were made on assumptions that the economy would continue to strengthen, including a larger drop in unemployment.

“While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years,” says Patrick L. Phillips, ULI chief executive officer. “These results hold much promise for the real estate industry.”

Source: “Real Estate Will Rock in 2014,” RISMedia (March 31, 2012)

Some real estate markets are reporting that home buyers are having to pay more than asking price to get the home they desire, as the supply of for-sale homes has shrunk, Bloomberg News reports.

Bidding wars were a common part of real estate in 2006. But when the market turned from a “seller’s market” to “buyer’s market,” more sellers started seeing lowball bids than high bids. Now times are slowly changing, and bidding wars are being reported in several markets, such as in Seattle, Boston, Silicon Valley, Miami, and Washington, D.C., Bloomberg reports.

The inventory of homes for-sale is near a six-year low. Mixed with the low inventory, the job market has been improving and buyers are being lured to the record level of affordability in the housing market. Existing-home sales and pending home sales are up more than 8 percent compared to a year earlier, the National Association of REALTORS® recently reported. Trulia Inc. also reported that falling home values and low mortgage rates have made home buying a better deal than renting in 98 of the 100 largest metro areas.

“The housing crash is finally giving way to recovery in an increasing number of markets across the country,” Mark Zandi, chief economist for Moody’s Analytics, told Blommberg. “The decline in unsold listings and vacant homes and the increase in rents presage better times ahead for single-family housing.”

Source: “Bidding Wars Erupt as Supply of Available Homes Shrink,” Bloomberg News (March 31, 2012)

An improving economy is contributing to a gradual rebound in home prices across the country, according to mortgage giant Freddie Mac’s 2012 Economic Outlook report, released Wednesday. But there is still a way to go in the road to recovery for the housing market, the report noted.

“The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” according to the report. “As if awakening from hibernation, housing starts and home sales moved to higher levels of activity.”

In fact, the signs have prompted Freddie Mac to revise its forecast upwards for home sales and originations. One economic contributor that’s helping to stabilize housing: The drop in the unemployment rate to 8.3 percent, its lowest level in three years, according to the report.

“A variety of encouraging indicators suggest that the housing market may be feeling a nascent recovery … and more neighborhoods may see a stabilization in overall demand and housing values this spring,” says Frank Nothaft, Freddie Mac’s chief economist.

Median home sale prices are up, despite a slight drop in new and existing home sales, Freddie Mac reports. About a half of the increase in housing starts has been for construction of rental apartments in multi-unit buildings to meet the increasing demand, the report notes. New rental construction, at its current pace, is expected to reach its highest level since 2005.

“Housing starts continue to run below net household formations [and will allow for absorption of existing vacant homes],” according to the report.

Source: “Freddie Mac: Economic Growth Expected to Stabilize Housing Market,” Dow Jones Newswires (March 28, 2012)

Foreign buyers are being lured by the bargain prices in American real estate. So which markets are the most attractive to these international buyers?

Florida continues to be the most popular destination among foreign home buyers, but other states are attracting more foreign interest as well. More than half–58 percent–of international sales in 2011 came from these four states alone: Florida (31 percent), California (12 percent), Texas (9 percent), and Arizona (6 percent), according to National Association of REALTORS® data.

Inman News recently identified the individual markets where foreign buyers make up the biggest share of home buyers. Among the top markets to make the list:

Lakeland-Winter Haven, Fla.
Cape Coral-Fort Myers, Fla.
Orlando-Kissimmee-Sanford, Fla.
North Point-Bradenton-Sarasota, Fla.
Miami-Fort Lauderdale-Pompano Beach, Fla.
Phoenix-Mesa-Glendale, Ariz.
New York County, N.Y. (Manhattan)
Honolulu

Source: “10 Hot Spots for Global Homebuyers,” Inman News (March 2012)

Economists say the housing market is starting to heal, but too many people aren’t aware of it because they’re judging a housing recovery on the wrong sign: What’s happening with home prices.

Paul Dales at Capital Economics says higher prices won’t be the sign that the housing market is on the mend — that can be a lagging indicator — but rather an increase in overall home sales. And that’s showing signs of improvement: Existing home sales in 2011 rose to 4.26 million compared to 4.19 million in 2010. In the last six months alone, home sales have increased 13 percent.

As a recent article at Fortune points out, “The evidence reminds us that perhaps we should change our expectations of what a housing recovery might look like, particularly following a crisis marked by record foreclosures and a financial crisis that sent the economy into one of the deepest recessions. The recovery we have been anticipating is defined more on the rate at which the glut of vacant properties comes off the market as opposed to any steady rise in prices, which some think won’t happen for another few years.”

Source: “The One Number to Watch for a Housing Recovery,” Fortune (March 20, 2012)

Median list prices nationwide increased 6.82 percent in February compared to February 2011, according to the latest data from Realtor.com, tracking 146 markets.

“The nation’s housing market as a whole are in better shape today than at any time since the 2009-2010 tax credits,” according to Realtor.com’s monthly housing summary. “While higher list prices do not always translate into higher sales prices, they may signal a growing optimism on the part of sellers that the market has begun to turn around.”

Florida continues to be the market seeing some of the biggest increases to median list prices in the last year. The following 10 markets posted the biggest rise in median list prices year-over-year, according to February housing data from Realtor.com.

1. Miami, Fla.

Year-over-year increase: 26.19%

Median list price: $265,000

2. Phoenix-Mesa, Ariz.

Year-over-year increase: 20.62%

Median list price: $174,900

3. Punta Gorda, Fla.

Year-over-year increase: 19.35%

Median list price: $185,000

4. West Palm Beach-Boca Raton, Fla.

Year-over-year increase: 18.48%

Median list price: $225,000

5. Washington, D.C.-Md.-Va.-W.Va.

Year-over-year increase: 18.45%

Median list price: $384,950

6. Boise City, Idaho

Year-over-year increase: 16.28%

Median list price: $150,000

7. Naples, Fla.

Year-over-year increase: 15.67%

Median list price: $369,000

8. Fort Myers-Cape Coral, Fla.

Year-over-year increase: 15.59%

Median list price: $229,900

9. Daytona Beach, Fla.

Year-over-year increase: 15.56%

Median list price: $179,000

10. Sarasota-Bradenton, Fla.

Year-over-year increase: 14.47%

Median list price: $246,000

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Foreclosures decreased by 8.4 percent — or 130,000 — in 2011, according to research by CoreLogic.

“The pace at which properties are entering foreclosure is slowing,” Mark Fleming, chief economist with CoreLogic, told CNNMoney. “And servicers nationwide stepped up the rate at which they were able to process distressed assets.”

So why are foreclosures dropping?

For one, lenders are being more cautious. Homes are entering the foreclosure process more slowly as lenders more carefully scrutinize paperwork before processing a foreclosure, after getting into big trouble for the mishandling of some foreclosures in recent years.

Also, with stricter credit conditions nowadays, lenders are being more choosy in who they give loans too, reserving mortgages for mostly only low-risk borrowers who have less chance of default and foreclosure.

Banks also are doing more loan modifications to prevent foreclosures. And when a home does land in foreclosure, banks are trying to process them faster or trying to encourage a short sale.

Fleming also notes “this is the first time in a year that REO sales [those of bank-owned properties] have outpaced completed foreclosures.” Case in point: There were 103 sales of bank-owned homes for every 100 homes in foreclosure inventory in December 2011. That’s compared to November 2010 when there were 94 REO sales for every 100 in the foreclosure process.

Source: “Homes in Foreclosure Decline by 130,000,” CNNMoney (Feb. 8, 2012)

Housing affordability conditions improved in most metropolitan areas from softer existing-home prices and record-low mortgage interest rates in the fourth quarter, with rising sales and lower inventory creating more balanced conditions, according to the latest quarterly report by the National Association of REALTORS®.

Introduced with this release is a new annual metro-level housing affordability index, with historically favorable conditions dominating across the country.

The median existing single-family home price rose in 29 out of 149 metropolitan statistical areas in the fourth quarter from a year earlier; two were unchanged and 118 areas had price declines.

Lawrence Yun, NAR chief economist, said the figures reflect greater home sales activity at lower price points. “Sales have risen strongly in lower price ranges from one year ago, while sales at the upper end remain sluggish,” he said. “More importantly, we’re seeing a consistent trend of declining inventory, which means supply and demand conditions are becoming more balanced in more areas, which will help stabilize home prices.”

The national median existing single-family home price was $163,500 in the fourth quarter, down 4.2 percent from $170,600 in the fourth quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes — foreclosures and short sales which sold at discounts averaging 15 to 20 percent — accounted for 30 percent of fourth quarter sales; they were 34 percent a year earlier.

Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times because the level of distressed sales, which artificially depress median prices, can vary notably in given markets. Annual price measures, also reported today, generally smooth out any quarterly swings.

“Broadly speaking, the very middle of the country, from the Dakotas and Nebraska to Oklahoma and Texas, has experienced very stable home price trends because of stronger job creation in those areas,” Yun said.

Total existing-home sales, including single-family homes and condos, increased 5.9 percent to a seasonally adjusted annual rate of 4.42 million in the fourth quarter from 4.17 million in the third quarter, and were 9.2 percent above the 4.04 million pace during the fourth quarter of 2010. All regions rose from the third quarter and from a year ago.

At the end of the fourth quarter there were 2.38 million existing homes available for sale, which is 21.2 percent lower than the close of the fourth quarter of 2010, when there were 3.02 million homes on the market.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said market conditions vary widely around the country. “Even with record high housing affordability conditions, all real estate is local,” he said. Both buyers and sellers need to be aware of what works in their local market, and REALTORS® are the best resource because they have unparalleled knowledge of local market conditions and options.”

NAR’s national Housing Affordability Index rose to a record high 184.5 in 2011, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small down payments, the affordability levels are relatively lower.

Metro areas with the greatest housing affordability conditions in 2011 include the Detroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio, at 242.9; and Decatur, Ill., at 236.8. Only 24 out of 152 metros measured had an affordability index below 100 in 2011.

“Clearly, the Midwest has the greatest concentration of areas where home buyers have the strongest purchasing power, followed by the South,” Yun said. “Metros on the West Coast and along the Northeastern seaboard have generally higher-priced homes, which account for lower affordability.”

Between 2010 and 2011, in markets where comparisons are available, all but 2 out of 148 areas showed improvement in housing affordability, and 69 MSAs had double-digit increases in affordability conditions.

The share of all-cash home purchases in the fourth quarter was 29 percent, unchanged from the third quarter; they were 30 percent in the fourth quarter of 2010. Investors, who are drawn by bargain prices and who account for the bulk of cash purchases, accounted for 19 percent of transactions in the third quarter; they were 20 percent in the third quarter and 19 percent a year ago.

First-time buyers purchased 33 percent of homes in the fourth quarter; they were 32 percent in both the third quarter and the fourth quarter of 2010.

In the condo sector, metro area condominium and cooperative prices — covering changes in 54 metro areas — showed the national median existing-condo price was $160,800 in the fourth quarter, which is 1.7 percent below the fourth quarter of 2010. Ten metros showed increases in their median condo price from a year ago; one was unchanged and 43 areas had declines.

Regionally, existing-home sales in the Northeast rose 6.3 percent in the fourth quarter and are 3.7 percent above the fourth quarter of 2010. The median existing single-family home price in the Northeast fell 4.6 percent to $229,200 in the fourth quarter from a year ago.

In the Midwest, existing-home sales increased 7.0 percent in the fourth quarter and are 14.1 percent higher than a year ago. The median existing single-family home price in the Midwest declined 3.3 percent to $134,100 in the fourth quarter from the fourth quarter in 2010.

Existing-home sales in the South rose 3.8 percent in the fourth quarter and are 9.1 percent above the same quarter in 2010. The median existing single-family home price in the South was $146,500 in the fourth quarter, down 3.8 percent from a year earlier.

Existing-home sales in the West increased 8.1 percent in the fourth quarter and are 8.4 percent higher than a year ago. The median existing single-family home price in the West declined 4.2 percent to $205,200 in the fourth quarter from the fourth quarter of 2010.

Source: National Association of REALTORS®

Several recent indicators for the real estate industry are pointing to a market that is on the mend and entering recovery mode.

Housing experts’ predictions for the new year tend to center around a market stabilizing before entering a gradual, albeit very slow, recovery. However, the tone is more upbeat than it has been in years for the housing market.

Here are a few of the signs that are showing the market moving in a more positive direction:

Home sales: Existing home sales are expected to increase 12 percent this year, following a 2 percent jump last year, Moody’s Analytics predicts. The signs are already showing: In November, pending home sales — a gauge for future home buying — reached its highest level in 19 months, the National Association of REALTORS® reported. (Read more.)

New-home market: Coming off of what could be considered the worst year for new-home building ever recorded, the sector is expected to bounce back this year. New-home sales and starts were already showing a rebound in the last few months of 2011. Moody’s is predicting that single-family housing starts will increase 37 percent this year, and new-home sales will soar 74 percent.

Housing stocks: Investors are starting to get optimistic about the possibility of a rebound too, and are turning to home builder stocks. These equities have recently outperformed the broader stock market and the S&P 1500 homebuilding index has increased 38 percent since mid-October, USA Today reports.

Consumer confidence: With mortgage rates at record lows and housing affordability high, about 71 percent of Americans say now is a good time to purchase a home. Also, more Americans are optimistic that home prices will rise over the next year — about 26 percent say prices will rise in 2012, an increase of 4 percent over the last survey, according to Fannie Mae’s December National Housing Survey

Source: “Housing Outlook Is More Upbeat,” USA Today (Jan. 15, 2012) and “Consumers More Confident, Survey Says,” Deseret News (Utah) (Jan. 16, 2012)

The apartment vacancy rate is at its lowest level since late 2001 as the rental market continues to soar, according to the latest fourth-quarter data by Reis Inc.

As demand increases, the vacancy rate for apartments dropped in the fourth quarter to 5.2 percent compared to 6.6 percent a year prior.

“Multifamily property has been the star of the real-estate sector for more than a year, generating profits for landlords but headaches for renters struggling with the economic downturn,” an article in The Wall Street Journal notes. “Demand has swelled from people being foreclosed out of their houses as well as those unable or unwilling to buy.”

Landlords are also raising their rents. Asking rents moved up 0.4 percent in the fourth quarter, averaging $1,064 a month nationwide — compared to $1,026 in 2009. New York City continued to have the highest rent in the country at $2,876 a month.

Meanwhile, as the rental market takes off, builders are rushing to play catch up in building new units to meet the demand. In 2011, Zelman & Associates estimates that more than 173,000 units were started, and about 225,000 and 280,000 starts are expected in 2012 and 2013.

Source: “Apartment-Vacancy Rate Tumbles to 2001 Level,” The Wall Street Journal (Jan. 5, 2012) [Log-in required.]