Altos predicts long, cold winter for housing market

A combination of low interest rates and a clogged inventory of foreclosed properties in the housing market are indicating a recovery is not in the forecast for the fall and winter seasons. The Altos Research Mid-Cities Report found home prices in July saw an increase in 14 of the 20 metropolitan areas in the survey, while inventory of homes for sale increased in 12 of the markets.

The survey said this is the first time the market has experienced low interest rates, high unemployment and a prominent inventory of properties. The housing market is in a state of flux with no sign of stabilizing soon. While eight of the 20 markets had a decline in home inventory, six of the 20 markets showed a drop in median home price.

In an economic letter of insight, the Federal Reserve Bank of Dallas predicted that new home construction could start showing recovery within the next year or so, while national house prices either hit bottom in 2010 or will hit bottom in early 2012, and then start to recover.

According to the bank's research, the one factor making the current housing market climate unique is mortgage credit standards. The low interest rates are not luring homebuyers into the market because the requirements to obtain a loan are too strict, inhibiting some buyers from qualifying for a new mortgage or refinancing an existing agreement. The bank emphasizes the importance of the relationship between house prices and consumer spending. Higher home prices create a higher perception of wealth, thus prompting consumer spending. The continued decline in home prices has slowed consumer spending, and will not likely improve until the second half of 2012.  

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