Jobs growth points to potential recovery in housing
The housing market remains in the trenches, but underlying fundamentals show a recovery is possible as long as employment continues to tick up, Capital Economics said Friday.
The economy added 200,000 jobs in December, which could push residential real estate forward if it is met with lower prices and looser underwriting standards, analysts at the Toronto-based research firm said.
Low mortgage rates and declining home prices are already creating a buyer's market. Using a 20% down payment formula, Capital Economics said a person buying a median-priced home today on a median salary only has to allocate 12.8% of their income toward housing.
Still, individual income in America remains weak overall. Nominal and real disposable incomes stayed flat in November, Capital Economics said. The savings rate also reverted back to 3.5% from its peak level of 5% last summer.
Tighter underwriting standards also remain an area of concern, but signs of a thaw are in the market.
More lenders are offering loans with an 80% loan-to-value ratio, up from 75% in 2010. Capital Economics believes this development will help first-time buyers.
Write to Kerri Panchuk.