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Trulia Chief Economist Jed Kolko and WSJ Housing Reporter Nick Timiraos on the outlook for the housing market.
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Welcome back the good news just keeps on coming at least in one part of the cut the economy.
Home prices jumping four point 3% and twenty major markets across the US.
Marking the biggest gain since may 2010 good news.
So the full housing recovery on track for 2013 here with answers truly is chief economist -- cocoa and it tumor -- Housing reporter for the Wall Street Journal welcome to you both -- I'll start with the -- How solid is this recovery and just how substantial.
Well Jerry this year the house full recovery proceeded farther -- anyone expected a year ago.
Right now.
Our housing barometer which looks at several indicators.
Tells us that the recovery is about halfway back to normal that's from the worst point during the bust what is around three years ago.
Back to the long term historical normal levels we still a long way to go and it's taken us three years to get -- but is is still better than anyone thought that we.
Yeah me at -- for God's -- what about some of the cities that are doing bats -- -- Imus pulling these deaths of Wike show our numbers.
Jad.
You know we're seeing Phoenix up dramatically 22% that was one of the cities that was just creamed in -- downturn.
Detroit up 10% that's also good news.
Where -- the bright spots in this country.
When it comes to price increases some of the biggest price increases are places like Phoenix.
Detroit and more recently Las Vegas not parts of Florida and even Atlanta places that were all hit hard during the bust.
A lot of those price increases are rebounds and it's a lot of it's coming from investor interest there are other markets that have even stronger fundamentals.
That missed both the boom and the -- well.
I had to tell -- I think everybody feels the pain I think.
But -- yield you know that bill White House the administration is leading the way in putting together putting forward yet another bailout for government sounds like.
They want to extend some existing programs to people who are underwater they owe more than -- than their home is worth.
Tell us about that I'm confused by the administration would even be thinking of this now as the market is recovering.
Right well -- ago they expanded a program where if you had a mortgage backed by the government.
You were current on your payments for your underwater you could refinance -- that program was quite successful.
Hundreds of thousands of underwater borrowers have been able to participate.
Now they want to broaden it to people who don't have government backed loans that.
The issue is that.
If people have done what they -- supports you pay your loan on time.
But you have a high interest rates say you're stuck in a six or 7% interest rate right now rates are down in the low -- that.
Shouldn't you be able to take advantage.
And so that's where they wanna do it.
I mean you know let's let's talk reality here in this Jolie stands the debt of Fannie Mae and Freddie Mac -- only makes them more important in the housing market that they already are witches.
Pretty important.
-- this latest plan is going to be controversial for that reason because it.
Up until now all of the refinance programs that said let's take the existing risk.
That's on the government's books and make it less risky by letting those people refinance now you're actually expanding.
The risk on the government's books are putting new loans that right now -- held by private investors I -- in the event is very involved.
And not expand it but just -- -- talk about another top of mind issue with you that's a fiscal cliff going over the fiscal cliff.
What what -- -- -- housing.
So the worst case scenario in the fiscal cliff if all the tax increases and spending cuts come into effect.
Would be bad for the cut would be bad for the economy would really hurt housing demand.
But even if the fiscal -- is solved if we do find other less damaging ways to resolve the fiscal cliff.
The housing market might still be affected if the mortgage interest deduction is cut back severely right now.
The mortgage interest deduction.
Cost the government roughly a hundred billion dollars a year in revenue and getting rid of that.
Would likely decrease home values particularly in more expensive areas.
BI and we hear that it would really.
Put the brakes on.
Home home selling home buying in those areas -- What are the issues for yield that you cover this every single day you know all issues in housing what are you looking for next year.
Well I think 33 things have been really important this year the first is that.
The inventories of homes for sale are down sharply and that's been great news for home sellers because there's less competition it's been bad news of course.
For buyers.
Demand is also up you have rising rents you now have rising prices both of those are gonna give urgency.
Jobs.
The growth hasn't been great but it's been enough to get people off the fence people feel more secure so demand is up.
And finally credit I think it will be very important to look at.
What are the standards to get a mortgage it's become much harder to get a mortgage even though rates are very low.
So it's cheap if you can qualify but it's still hard for lot of folks to qualify and I think that'll continue to be.
Headwind for house and the next year what we see inventory pop higher next year there's still a lot of houses on well -- That there is but I think builders are certainly building more homes now and so you'll see more of that and then -- prices -- that could unlock some more.
Homeowners for their homes on the market.
Genteel let's look at markets to watch in 2013 where you see big growth that we got a map of this one.
-- San Francisco -- -- that's a market that always seems to do well.
Out what other towns and cities should we look at.
There are some markets that have really strong fundamentals and by fundamentals I mean strong job growth.
Low vacancy rates and a very small foreclosure inventory very small.
Inventory of homes still to come onto the market.
San Francisco several metros in Texas Omaha Louisville some of the places that haven't gotten as much attention which -- big price increases.
But have had strong market fundamentals -- along our markets to watch next.
Hear what we're taking a look at that right now in the Texas markets you're -- you're describing Fort Worth Austin Houston San Antonio.
And then that in Nebraska we've -- Omaha -- Louisville Peabody Massachusetts Bethesda Maryland.
High interest staying save run some numbers on that it'll be agency with those have -- still maybe we'll have you back we'll check in at the end of next year.
-- -- thanks for coming on tonight great to have both of you here have a great new year to both of you.
Thanks --
