Mark Zandi's view on the housing market in 2013

Mark Zandi of Moody's spoke yesterday at the Suburban West Realtors Association installation of its new board of directors and Chair, Kathy McQuilken.Overall he was pretty confident about the economy and the housing market in general.

Whilst the next two quarters according to Mark Zandi might be a little soft, by the end of the year we most likely will see GDP at 2% about the same as 2012, with it picking up in 2014 and 2015 to about 4%. The approach of the debt ceiling negotiations is approaching fast and this is what is going to affect the economy for the next two quarters in his opinion, keeping it as little soft as companies and small businesses face the uncertainty created by Washington and the negotiations over the debt ceiling and reducing the expenditures of the Federal Government.

Mark Zandi's opinion was that most likely we will see cuts of about $1 Trillion over the next ten years. If a deal is reached the cloud of uncertainty will clear, the quicker the better in most people's opinion. Reasons why Mark Zandi is so confident is that banks are at their strongest they have ever been due to increased capitalization. The credit spigot will ease and mortgages and loans will become easier to obtain over time. US companies are also in positions of strength with their balance sheets looking robust and healthy. Households in general have handled their debt well over the last few years, reducing debt and improving their debt ratios, whilst their is a difference between low income and high income households the position has improved dramatically and credit card defaults, auto loans and mortgage defaults have all been dropping.

The housing market has weathered the storm, and the numbers of new homes being started is increasing, and these numbers simply need to increase as homes are replaced following disasters such as Sandy, tornadoes etc, increases in households being formed means new homes are needed and as these are built they act as a spur to the general economy as hardware, windows etc are needed for these new homes, it spins out to the whole economy, in furniture, curtains and other decorations being purchased providing jobs for lots of people.

Whilst their are still foreclosure properties working through the system these most likely will be cleared by 2015, and as the market improves during 2014 many of these will be taken up by investors.

Whilst this is all positive, there are some problems on the horizon, Washington and their ability to negotiate a deal without causing to much damage to the economy. Europe seems to have dealt with its immediate problems, but if Spain or Greece decide to withdraw from the European Union this could be a disaster for the country and for the world economy as it absorbs the news. The ongoing situation with Iran over nuclear power and how this might affect oil prices worldwide and hence the world economy.

In answering questions a couple of interesting points came up, Mark Zandi felt that there does need to be a government backstop to the mortgage market to provide for the 30 year fixed mortgage as we are the only country in the world which has a 30 year fixed rate mortgage and it this is one of the things that really helps the housing industry in the US.

Investors have almost removed the discount there is in buying a REO or Short Sale property as they have entered the market and been bidding up the prices for these properties.

Finally, in answer to whether the politicians really GET IT? Mark Zandi said he felt that the majority of politicians in Washing to do understand the need to work together, and work hard, very hard to try to find a position behind closed doors where a deal can be reached.

All comments above are my understanding of what I heard, any errors are on my part. Having listened to Mark Zandi, I am hopeful the market is healthy and this year will see some growth for the housing market along the Main Line. As stated last week, our market place is seeing a dearth of inventory and buyers are dealing with pent up demand, creating bidding wars on properties coming to market right now. All signs of the housing market recovering here along the Main Line.