The housing recovery may not be a boom “but it’s recovering,” said Kenneth T. Rosen, chairman of the University of California, Berkeley, Fisher Center for Real Estate and Urban Economics.
Several challenges face the housing market that will prevent a boom from taking shape, particularly from tight lending conditions that have prompted the recovery to be marked by slow growth rather than rapid growth, Rosen noted at a recent conference.
"The problem is not [that there is not] enough money, because the [Federal Reserve] has poured in a lot of money into the economy," Rosen said. "We have too much money out there, not too little money. The problem is loan availability."
He says that the strict credit score requirements have led to 40 percent of potential buyers unable to qualify for a loan nowadays.
"We have very strong job creation. Private sector job creation is very good, [though] a little slow in summer,” Rosen said. “Home sales are coming back. We have very low interest rates.”
But Rosen cautions a chief concern is the looming “fiscal cliff,” a number of tax increases and spending cuts that are expected to go into effect next year if lawmakers are unable to reach a deal before the deadline.
"We don't know what's going to happen, but we do know taxes will be higher," Rosen said. "A lot higher or a little higher, we don't know. ... It will hurt the housing market because there will be less money in the system.” But how big an effect it will have on the housing market will depend on which tax increases go through, he said.
Source: “Forecast for Steady Growth, but No Boom in Home Sales,” Inman News