What Had the Biggest Impact on Housing in 2011?

The “government, the mortgage industry, and forces of nature all shook the housing market in 2011,” according to a recent Time magazine article, which highlights the key issues that had the greatest impact on the real estate market this year--and what’s expected to have a major impact in the new year as well.

Here are a few of the issues that the Time magazine article by Jed Kolko, Trulia’s chief economist, notes as having some of the greatest impact:

1. The robo-signing scandal

The issue: Banks were accused of approving numerous foreclosures without proper reviews when a robo-signing scandal first broke in October 2010, continuing well-into 2011.

The fallout: Banks slowed their processing of foreclosures greatly in 2011, making sure to take extra precautions. Regulators and states are working on a settlement with banks over the scandal — one that could include reducing loan balances of current home owners, if approved. Once a settlement is in place, housing experts predict the pace of foreclosures to pick up in 2012.

2. Natural disasters

The issue: A series of natural disasters wreaked havoc on real estate in 2011, from tornados, floods, and hurricanes. The National Flood Insurance Program was pushed into the spotlight, a program still financially strapped after Hurricane Katrina. The program’s insurance premiums were not fully covering insurance claims in disasters this year, according to the Time magazine article.

The fallout: For home owners living in flood-prone areas, “you can’t get a mortgage if you don’t have flood insurance,” the Time magazine article notes. “Without NFIP, housing markets in these areas would skid to a stop.” NFIP recently received an extension until May 2012 but experts say the future of the program still remains uncertain.

3. The conforming loan limit

The issue: In October, the government lowered the conforming loan limit for loans backed by Fannie Mae and Freddie Mac as well as those insured by the Federal Housing Administration from $729,750 to $625,500 in most areas. The real estate industry urged the government to keep the conforming loan limits higher. In November, the government raised the loan limits back up for FHA loans, but they left out Fannie and Freddie loans.

The fallout: “Mortgage lenders are willing to charge lower rates for loans that are backed by Fannie or Freddie; with a lower conforming loan limit, a small number of loans that used to qualify for federal backing no longer do,” the Time magazine article notes.

Read more about the key issues for the real estate industry in 2011.

Source: “5 Events That Really Mattered for Housing in 2011 -- and Beyond,” Time Magazine (Dec. 29, 2011)