U.S. housing market finally ready for take-off?

In this Thursday, Dec. 20, 2012, photo, a sign hangs in North Andover, Mass., where an existing home is for sale. / AP Photo/Elise Amendola

(Moneywatch) Last year ended on an up note for the real estate market: Home prices, pending sales and construction activity all increased, while the number of existing houses for sale continued to drop. At the same time, home values remain depressed, while what is expected to be slow economic growth this year could hinder the housing sector's recovery.

So will 2013 be the year that buyers and sellers finally return to the market en masse, or will people continue to stay on the sidelines in hope of a stronger recovery?

Many, but not all, experts believe will 2013 will be a good year to be a seller because there are fewer homes on the market, propping up prices, and mortgages are more easily available.

Inventories of unsold homes in November amounted to 4.8 months of sales, the lowest level since before the housing meltdown, according to the Center for Economic Policy Research. Existing home sales rose 5.9 percent in November and are up 14.5 percent over a year ago. New home sales grew 4.4 percent that month and were 15.3 percent above year-ago levels. As of late last year, housing starts were up nearly nearly 27 percent over the same period in 2011.

"Sellers will be in control next spring as inventories are low and financing is available," says Ron Throupe, assistant professor at the Franklin L. Burns School of Real Estate and Construction Management at the University of Denver. "You still hear some stories of buyers not able to get financing, but I think lenders are slowly working this out."

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People who were able to buy properties on the cheap are in an especially good position, says Lex Levinrad, chairman of the Distressed Real Estate Investors Association. This "has the potential to be a banner year for real estate sellers," he says. "For those that purchased distressed properties in the last three years, many of those properties have increased in value anywhere from 25 percent to 50 percent, or even higher."

Still, some see the decrease in inventory of unsold homes as neither favoring buyers nor sellers, but rather returning a level of equilibrium to the market.

"In many markets across the country the inventory is currently at normal. sustainable levels," says Ryan Zuckerman, president of housing research firm HomeHub. "[This means] there isn't an oversupply of homes any more. This is changing the climate from becoming a seller's market to more of a neutral market. This change is an extremely positive sign because it is signaling a change in supply and demand. The supply is decreasing while demand is increasing."

The factor likely to have the biggest impact on real estate this year is the availability of credit. Big banks continue to be tight with loans because of the ultra-low interest rates mortgages fetch, preferring to husband their capital or to focus on more lucrative business lines, like trading. Lenders also can typically make more money refinancing an existing mortgage than issuing a new one.

As a result, the nation's biggest banks continue to set a high bar bar for borrowing, especially with such lenders still dealing with the legal and financial fallout of the bad loans they issued during the housing boom. Yet that is creating opportunities for smaller, local banks, which typically have a better understanding of individual real estate markets, to step up their lending.

Says Susan Lyon, an analyst with NerdWallet, a provider of personal finance tools, "While it's very cheap to get a mortgage, it's also very difficult to qualify for one in today's market. And that holds back any kind of full housing recovery."

But Lyon also see genuine signs of healing in the housing market. "On the positive indicator side, we look at great construction numbers, and also compare house price versus rental price indices to show how the two are coming back into equilibrium after quite a bubble in recent years."

This means that in many areas rents are rising to the point where they are nearly the same as monthly mortgage payments.

In real estate, of course, location is everything. Given the variation in local real estate and broader economic conditions around the U.S., where people live could have the greatest influence on whether to buy or sell.

"Although home sellers will see conditions improve relative to last year, it will still very much be a buyer's market in 2013," says Greg McBride, a senior financial analyst at Bankrate.com. He expects buyers will do better in states where lenders do not have to seek court approval to complete foreclosures. More homes are on the market in these states because foreclosures may be completed more quickly than in states requiring a judge's consent.

[Reversem]

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[dralbin]

Professor Ron Thoupe must be on a different planet. First of all most houses sold have been in foreclosure. Second, over 30% were bought for cash. There is no mortgage market: although mortgage applications are up, nearly 40 % are turned down. To qualify, in most cases, applicants need a 700 FICA score or a minimum down payment of 25%. Although we see floating regional "recovery" it is not consistent. Builders have no choice--they need to build after staying out of the market for nearly five years. At some point, "builder push" has replaced "demand pull" for new housing starts. Ginnie MAe, Fannie Mae and Freddie Mac have created such burdensome oversight that banks just can't loan. Finally, banks rather invest business to business than risk money in the housing market.

[dougmaz]

First let me state that any idea that housing can lead a recovery is ignorant. Housing is a lagging indicator of a healthy economy, it can supplement and increase economic growth but it is not an engine of economic growth; a healthy housing market is a SYMPTOM of a healthy economy.

Second, our economists and journalists are completely incapable of breaking down complex systems to their barest elements for analysis; they are unable to step back and evaluate the efficacy of their policies.

So I will ask one simple question that even our innumerate "economists" may be able to understand: When average incomes are declining, does it make any sense that housing prices can rise in a sustainable manner? I'll give the innumerate a clue: NO!