As we close out 2012, it’s a good time to review what happened to the state of the economy and the housing market during the year. In our look back over the last 12 months, one thing is extremely clear: We’ve made progress.
We began the year with the mentality to be patient, to let the market repair itself and adapt to the changes. Staying consistent to that mindset, we made the following observations that influenced the housing market. (Please click on the links for our previous Thought Leadership columns discussing these topics in more detail.)
1. Low interest rates
Throughout the year, we have seen artificially low rates. They fluctuate, but overall the low rates were an opportunity for many buyers to enter the market as well as for current homeowners looking to refinance. Rates are not historically the determining factor in homeownership but this past year, rates and consumer confidence shared in the influence. Consumer confidence drove the intent to buy or the income to refinance and rates were at generational lows due to Quantitative Easing by the government.
2. First-time homebuyers
This past year provided numerous opportunities for first-time homebuyers. With rising rental rates in Atlanta, it actually became a better financial decision to buy a home rather than rent for many people. Low home prices coupled with low interest rates made homeownership extremely attractive for first-time buyers. When more people enter the market, the recovery begins to move more quickly.
3. Increase in construction
We have just begun to see an increase in construction in our market, but more can be expected. Increased construction is a result of an increase in demand. In addition to first-time buyers entering the market, “boomerang buyers,” are also back. Eventually, more construction will have a ripple effect throughout other industries as supplies and resources are needed. With constraints in construction financing and licensing requirements, we expect the construction of new homes to improve slower than in previous recoveries.
4. Consumer confidence
All of the above factors led to where we are today – an increase in consumer confidence. More people entered the market as a result of low interest rates and home prices, which led to more construction, which will lead to more choices for buyers. This movement in the market illustrates to those that are hesitant that it is indeed a good time to stake your family’s claim on a home.
Our team at Southeast Mortgage has been patient allowing the market to repair itself. We understand the importance of letting the housing market — and in turn, the economy — follows patterns that have been consistent in the past two recessions we navigated. Re-inflation of the economy cannot be pushed and adapting along the way is the best method of making the process an opportunity. If our representatives in Washington provide a constructive foundation for the economy, we all can look forward to many years of prosperity until the next deflationary period.
One of my first columns in 2012 compared the recession to the tides in the Low Country of Georgia. Both have a cycle and are influenced by factors beyond our control.
Our country has been in the mud, waiting for the tide to come in. Now, as we close out 2012, I am happy to report the tide is rising and it is time to launch your boat.