The 5 Biggest Real Estate Stories of 2012

At KCM, we concentrate on the trends that impact the housing market. Here are what we believe were the biggest stories of 2012.

Housing Was a Tailwind not a Headwind to the National Economy

Over the last several years, many experts claimed that the housing market would not recover until the overall economy recovered. Others, including us here at KCM, believed the exact opposite – the overall economy would not recover until housing recovered. This past year, housing has been one of the only bright spots in an otherwise lethargic economic recovery.

The Fed Remained Committed to Historically Low Mortgage Rates

At the end of 2011, 30-year mortgage rates were at 3.95%. Many, including us, believed that rates had only one way to go – UP! We were wrong. Mr. Bernanke and the Fed continued policies which supported keeping rates at historical lows. This resulted in rates dropping to below 3.4% by year’s end.

Demand Remained Strong throughout the Year

Home sales numbers continued to increase throughout the year suggesting that the country’s belief in homeownership still remains strong. Even the last Existing Homes Sales Report of the year from the National Association of Realtors revealed that home sales were up 5.9% from the previous month and 14.5% from the same time last year.

Inventory Began Shrinking

Housing inventory is at its lowest level (4.8 months) since September of 2005. This represents 22.5% decrease as compared to the same time last year. Shadow Inventory, the inventory of distressed properties coming to market, is also shrinking. This is for two reasons:

1. we are clearing more foreclosures and short sales
2. less families are falling behind in their mortgage payments

Prices First Stabilized and then Increased

Perhaps the biggest story of 2012 is that home values turned the corner and headed upward. By the end of the year, home values were up 10.1% compared to the end of 2011.

Tomorrow, we will predict the five biggest real estate stories for 2013.