With a fiscal year capped off by a housing market recovery, many investors are curious as to whether we’ll continue seeing a rebound through the next year. A drop in mortgage defaults coupled with a rise in home closings has worked in tandem to strengthen confidence in the housing market, and the persistence of low interest rates has encouraged property purchase. Temporary signs of market health aside, there remain questions as to whether or not the real estate sector will become a safe source for future investment.
In surveying the various economic indicators emerging in Q4, it seems we are in fact slated to see growth through FY2013. Considering the expansive nature of the United States housing market, it seems prudent to examine a broad array of factors when evaluating investment viability.
One of the primary considerations is whether or not the United States housing market is healthy as a whole, or whether the recovery is regionally segmented. Certain regions of the country were hit particularly hard by the housing recession and experienced a sharp drop in property value (California and the Northeast come to mind), while other areas suffered less and were quick to recover. The Midwest’s metro regions seem to be faring particularly well, especially in terms of maintaining appealing housing prices while increasing the volume of home closings.
According to Yahoo! Finance, while the housing market seems to be collectively rebounding, we’re seeing some regional favoritism towards a buyer’s market. In certain areas of the United States, the housing stock significantly outstrips demand, competitively driving down prices for property listings. This is naturally a boon in favor of homebuyers, but for those looking to see growth returns from property investments, hopes would seem premature.
Interestingly enough, the regions hit least hard by the 2008 housing crash are generally the areas now standing as buyer’s markets. These regions (Ohio, Illinois, Missouri) saw more consistent purchases in the last two years, and areas with more stagnant sales seem to be emerging as sellers markets. Both the greater West Coast and the employment hub of Washington, D.C. are fast seeing an uptick in both buyer interest as well as property values. This naturally bodes well for the housing market outlook, especially since previously shaky sales region seem returning to health.
From a birds-eye view, the greater impression is that the areas of the country that had lagged in sales (and lost the greatest real estate value) post-crash are quick catching up to the areas that were less impacted. Other indicators are also bolstering estimates that the housing market is gaining investment momentum. As I’d written in a previous post, United States property investment is receiving unambiguous endorsement from foreign finance players. Overseas finance titans are turning to our real estate market as a stable source of investment allocation. While some Americans may feel uncomfortable with non-U.S. entities holding stake in our real estate, this only validates burgeoning market stabilization.
Ultimately, yearly reports from both homebuilders and American banks will further clarify earnings projections. Until the yearly financial disclosures are compiled, the market outlook for FY2013 seems slated for broad stability, if not selective areas of growth.