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Experts Say Huge Housing Recovery Unlikely

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The national housing market has been in recovery mode for several months now, and experts believe that gains will continue at least through the end of the year. However, it’s also important that expectations be tempered, as there likely won’t be a massive surge in the industry, experts say.

Between 1997 and 2006, prior to the housing market meltdown that kickstarted the national recession, housing values rose as much as 86 percent across the country when adjusted for inflation, and much of that improvement was wiped out by the beginning of 2012, housing expert Robert Shiller wrote in a piece for the New York Times. And while it’s entirely possible that there could be that kind of appreciation in the next decade or so as the real estate market recovers, it doesn’t seem very likely, simply because of how close together the last housing boom happened.

Prior to the surge seen in the late 1990s and early 2000s, the biggest housing boom the country experienced came between 1942 and 1953, the report said. At that time, prices rose about 68 percent. Now, consumers’ attitudes toward home ownership may be what holds back a broad and massive recovery, as many have reverted to renting rather than buying properties, and research suggests this is likely driven by Americans’ uncertainty about the market at large.

Many within the industry see recovery as being extremely slow within the next five years or so, and, when adjusting for inflation, growth could only come to 1 or 2 percent annually, Shiller said. That kind of price increase might encourage more sellers to begin listing their homes for sale, or at least get them under the negative equity of the underwater mortgages they may have been holding onto these last few years out of necessity, but it’s unlikely that prices will begin rising so dramatically that there is another scramble within the housing sector.

The problem for the market right now is that while values have risen significantly in the last seven or eight months, there is still not enough seller interest to meet the existing buyer demand. Affordability is still extremely high because of low interest rates and still-low prices, meaning that many buyers who may have been waiting on the sidelines for some time now have ample reason to delve into the market in earnest. That competition for a smaller number of properties is one reason that prices continue to rise.

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