Economist provides optimistic outlook for housing industry

There are reasons to be optimistic about housing over the next several years, according to Dr. Mark Zandi, chief economist with Moody’s Analytics.

“I’m optimistic we have righted the wrongs that got us into this mess, not all, but most,” Zandi said as he addressed the 2013 Commonwealth Housing Forum, sponsored by the Pennsylvania Housing Finance Agency (PHFA), in Harrisburg last week. He cited overvalued homes, over construction and bad loans as areas that led to the housing collapse.

Zandi noted that nationwide housing prices collapsed during the recession by about a third but not quite as much in Pennsylvania. He noted that Pittsburgh did not, however, suffer any meaningful housing price declines.

“The Realtors® (NAR’s) affordability index reflects the incredibly low mortgage rates and lower home prices,” he said. “The prospects are that interest rates will low for two or three years. And many markets are seeing homes undervalued.” He said, however, that overall Pennsylvania housing is appropriately valued.

Zandi drew laughs when he jokingly added, “Certainly my home in outside of Philadelphia is extremely undervalued.”

“Housing is key to the broader economic recovery.  For every house built, 4.5 jobs are created. We need the housing market to lead the way and we look like we’re on that road,” he said.

“I think we’re through the worst of the foreclosure issue,” Zandi observed. “I don’t think it’s going to be a significant problem going forward in the housing industry.”

He sees a couple of threats to his overall optimism. “Going forward in the broader economy and the job market we’re going to feel uncomfortable in the next couple of quarters. We’re facing tax increases and significant spending cuts and that adds up to a drag on the economy,” he said. “I think we’ll navigate through but we are vulnerable. If something goes wrong, we could be in trouble.”

Zandi said he worries about the availability of mortgage credit. “It’s already pretty tight, lenders are nervous. With the problems before and regulatory issues, lenders have become more reluctant to extend credit to marginal homebuyers. So far it hasn’t done much damage to the market but it could be a problem to have enough credit in the future,” he added.

“A number of regulatory issues need to come together. The QRM (Qualified Residential Mortgage) needs to come back to life if we’re going to have enough credit available. We also need some clarification on Basel III or the big mortgage lenders will be reluctant to extend credit.

“We need clarity on the world finance system because it’s not healthy for the housing market. Regulators will come together to give guidance and they’re making some good headway,” he added.

By Kim Shindle

Kim is the Manager of Media Relations at the Pennsylvania Association of Realtors

 

 

%d bloggers like this: