Real Estate Outlook: Improving Markets, Difficult Credit

The unemployment rate is on the decline, at least it was for the month of November, according to the Bureau of Labor Statistics. It is now at 8.6 percent, as employment rose by 120,000.

Construction employment, a hard-hit sector during the housing bust and recession, showed little improvement for the month. It was leisure and hospitality, retail trade, health care, and professional and business services that saw upward movement.

Some of this is due to seasonal hiring, but improving employment has been one of the factors leading to more markets making the "Improving Markets Index" list over the past quarter. December's list featured 20 new markets, meaning these cities met the criteria of improving housing permits, employment and house prices for at least six consecutive months.

Some major markets new to list included Washington, D.C., San Jose, CA, and Toledo, OH.

"The increases we continue to see in the number and geographic diversity of improving metros are quite encouraging, and evidence of the fact that all housing markets are dependent on uniquely local factors," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.

Improving markets owe partial thanks to historically low interest rates that continue to find new bottoms. These great new rates are sometimes very difficult to procure, however. Builders especially are finding difficulty in obtaining loans.

The National Association of Home Builders (NAHB) reports that more than half of today's single-family builders have put a hold on new construction until financing sees improvement.

"Restoring the flow of credit to housing is critical for the industry to rebound, provide jobs and boost the economy," said Nielsen.

For a clearer look at the conditions, let's take a moment to review the results of the latest NAHB builder survey.

• 77 percent said lenders were reducing the amount they were willing to lend.
• 75 percent reported seeing the allowable loan-to-value ratio being lowered.
• 66 percent found lenders who were not making any new real estate loans.
• 63 percent said they encountered lenders who were requiring personal guarantees or collateral not related to the project.

The reason for these conditions? According to the NAHB, "Lenders most often told builders they were tightening on loans because the regulators were forcing them to do so."

It's not all bad news, though, when it comes to credit. CBS news predicted last week that 2012 could see a drop in mortgage delinquencies. They report this drop will be significant and reliant on an improving economy and increased consumer confidence. The rate, however, will still remain above pre-recession averages.

Steven Chaouki, credit agency TransUnion's vice president, reported to CBS that as credit has become more difficult to obtain, homeowners are having to become more practical about keeping their homes. They have fewer credit cards to rely on or default on first. This means homeowners are committed to and have prioritized for keeping current on their house payments.



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