Will 2012 be the Year of the House?

In this July 26, 2011 photo, a sale pending sign is set outside a house in Bath, Maine. The number of people who signed contracts to buy homes rose for a second month in June. But the gain was not enough to signal a rebound in the weak housing market.

Housing, the epicenter of the financial crisis, could finally bottom this year. I know you may have heard that hope/prediction before, but 2012 may just be the Year of the House. That doesn't mean we'll soon return to the bubble years of 2000-2006, when house prices doubled and house-flipping became the national pastime. It does mean that both housing starts and sales could increase from the rock-bottom, terrible levels that we have seen over the past two years.

There were some glimmers of hope last year: Layoffs stopped in construction for the first time since 2006, and apartment sales and construction helped the sector look a tiny bit healthier. That said, any increases will be small, and prices may drop a touch before leveling out later in the year. The culprit remains the foreclosure pipeline, which remains bloated.

Many experts say that because the housing bubble was so dramatic, we might not see a "normal" market until 2013 or 2014. But like any asset, you shouldn't try to time the rock-bottom price or rate. Here are three things you need if you are considering a home purchase:

1) A 20 percent down payment: There's probably a lender that will do less, but the traditional "20-down" could save your bacon if house prices continue to decline

2) Good credit: Check your credit before starting the mortgage process -- you can get reports from all three agencies free of charge at annualcreditreport.com. If there are any problems, you can correct them before the loan process begins.

3) The financial rationale to buy: If you are currently paying really cheap rent, buying may not make a lot of sense. Check out this great New York Times rent vs. buy calculator.

  • Jill Schlesinger On Twitter» On Google+»

    View all articles by Jill Schlesinger on CBS MoneyWatch »
    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.