The Good

Mortgage rates heading into the year remain at the lowest levels on many institutions books since being recorded, such as Freddie Mac’s weekly Primary Mortgage Market Survey and the Mortgage Bankers Associations weekly mortgage rates survey. The average 30 year fixed mortgage rate is hovering just below the 4 percent mark, which gives home buyers the purchasing power they need to attain an affordable mortgage.

Additionally, the Federal Open Market Committee has continuously announced their plans to keep the Federal Funds Rate at 0 percent to ¼ percent indefinitely until 2013. The Federal Funds Rate is the rate at which banks lend to one another and does not directly impact mortgage rates but does hint towards the direction all rates are headed so we should not see any significant increases to mortgage rates in the coming year.

The portrayal of the general media is that obtaining a loan to purchase a home is tough and not many potential home buyers qualify for a new home loan. This general assumption is very misleading and is hurting home sales and ultimately our economy.

In order to qualify for a new home loan through the Federal Housing Administration (FHA) you simply need a 620 credit score and a minimum of 3.5 percent of the home’s purchase price as a down payment. Obviously there is a bit more to obtaining a new home loan, but if you meet the qualifications above you are in a good position to purchase a home and should talk with a local mortgage company approved by the FHA for additional qualification guidelines.

The Bad

Home values across much of the nation took another big hit in 2011, an estimated $700 billion in losses. Accompanied by the lowest mortgage rates in history we now have a housing market that is more affordable than before the housing boom began making 2012 a prime home buying season for investors.

I predict that we will continue to see falling home values throughout most of 2012, but at a far slower pace than in recent years, and may even see stabilizing values, and in some areas increasing home values as the year wears on.

The Ugly

The biggest concern for the 2012 housing market will be the back log of foreclosures that banks have on their books. Foreclosures and short sales currently make up about one third of the entire U.S. housing market and are expected to increase in 2012.

This back log of foreclosures will continue to keep home values down, especially in some of the hardest hit communities across that nation. However, with homes as affordable as they are you can expect investors to snatch up and rehab one, two or even more foreclosures at a time for pennies on the dollar.

The rehab business has been in high demand and will likely continue throughout 2012 as many potential home buyers are ready to leave the in laws basements and the small over priced apartments for a more affordable home that they can truly call their own.

My prediction for the 2012 housing market, take It or leave it, is that home values throughout much of the nation are going to hit bottom by year’s end, home sales will increase on a year over year basis and home investors will be the big winners in 2012.

This article was written by Jeremy Redlinger, a Mortgage Loan Originator #627335 licensed in the state of Minnesota. As a mortgage professional of 10 years I strive to help home buyers find the home financing they deserve when purchasing a new home. For local information about the Minneapolis Housing Market and mortgage products please visit my website at www.newhomemortgagemn.com.