By Vicki Needham and Peter Schroeder - 10/21/12 09:35 PM EDT
The housing market is showing signs of sustainable growth but the improvement could be too little too late to boost President Obama's reelection hopes.
Although the housing market has been on the mend for the past year, industry experts now say that the sector has finally turned the corner, reaching deeper into harder hit areas and creating the expectation that the pace of the recovery will accelerate over the next several years.
But while housing plays a key role in the nation's economic trajectory, neither campaign has been willing to make it a central point on the campaign trail.
In a speech on Friday in Fairfax, Va., Obama mentioned that "home values are back on the rise.” And the president did bring it up during a Thursday night interview on "The Daily Show," saying the housing crash led to the financial crisis and reiterated the need for a broader refinancing plan that would save homeowners who are underwater on their home loans upward of $3,000 a year on their mortgage payments.
The "housing market would be helped, employment would be helped," Obama said.
Meanwhile Romney has released an outline of a broad housing plan, but has not made a point of pushing the topic at campaign events or during the first two debates.
The housing market comeback is also happening despite little action on Capitol Hill. The Senate is scheduled to take up a bill when they return next month that is endorsed by the White House and would streamline refinancing for Fannie Mae and Freddie Mac borrowers.
One reason for the recent surge in housing activity may be due to the Federal Reserve.
The central bank announced in September it was embarking on a third round of “quantitative easing,” in which it will buy up $40 billion a month in bonds backed by mortgages to lower rates and borrowing costs.
Fed Chairman Ben Bernanke made clear that the aim is to get the housing market back on track and that it will continue the purchases until it is satisfied with the strength of the recovery and the improvement in the labor market — and then it will buy just a bit more to make sure.
“Our mortgage-backed securities purchases ought to drive down mortgage rates, and put downward pressure on mortgage rates, and create more demand for homes and more refinancing,” he said.
“I’m hopeful we’ll see continued progress in the housing market. That has been one of the missing pistons in the engine here. Housing is usually a big part of the recovery process. We haven’t had that nearly to the usual extent,” Bernanke said.
While a housing comeback could be an economic boon, it is unlikely it will offer much of a boost to the president’s reelection efforts with only three weeks to go until voters hit the polls.
Overall, housing experts agree that the sector is gradually improving — prices are rising in most areas, consumer confidence is improving, builder confidence hit a six-year high this week, housing construction is moving along at its fastest pace in four years, mortgage rates are hovering near historic lows and retail sales showed an improvement.
“The recovery is only breaking out this year,” said Lawrence Yun, chief economist at the National Association of Realtors, who also pointed out that while there may be some people feeling “subconsciously” better about the economy as housing turns around, there are plenty of others still grappling with foreclosures or with home loans that lost value when the bubble burst.
“In some place, it may take 10 or 15 years to fully recover the value,” he said. “Price increases that we are seeing overall are more of a modest increase after a very difficult four- to five-year timeframe.”
“I would say, broadly speaking, that the housing market has clearly turned the corner," he said.
However, a drag on housing activity could come from continued fiscal uncertainties, builders struggling to obtain construction credit, qualified buyers who are unable to obtain a mortgage, inaccurate appraisals, seriously delinquent mortgages and a limited inventory of developed lots in certain markets, David Crowe, chief economist at the National Association of Home Builders (NAHB) said this week.
Other causes contributing to uncertainty in the marketplace include the looming "fiscal cliff" that will trigger mandatory spending cuts and tax increases at the beginning of next year, pending Dodd-Frank Act regulations that are making financial institutions hesitant to lend since they don't know how the new rules will affect them, tax reform, and the future role of Fannie Mae and Freddie Mac in the nation's housing finance system.
Mark Zandi, chief economist for Moody's Analytics, expects economic growth to take off from an anemic 2 percent this year and next and, eventually, pop back up to 4 percent in 2014 and 2015.
"A big part of this optimism is the housing market," Zandi said this week.
Zandi's rosy forecast derives from the expectation that mortgage rates would remain very low, the availability of housing credit will improve as private mortgage lending begins to pick up, and the job market gains traction, as policymakers work to resolve fiscal issues, which will ease market uncertainties.
"Hiring will remain weak until this is resolved," he said.
His forecast assumes that Democrats and Republicans will strike a deal on these contentious issues.
If the nation has the "political will to address the fiscal issues in a reasonable way, I think we will be off and running," Zandi said.