The big wildcard in the 2011 housing forecast remains employment. Will the predicted improvement in jobs and household formation balance the negative perceptions brought by rising foreclosure rates and concerns about improper foreclosure procedures?

While home affordability factors are at their best levels in years, consumers have begun to question if owning a home is a good personal decision. The discussion about dropping the mortgage interest deduction is fanning those flames.

John Tuccillo, housing analyst and former chief economist for the National Association of Realtors, said there is high-level debate in our nation’s capital regarding the inherent value of homeownership that has people concerned long-term.

"Real estate remains a pothole due to uncertainty," Tuccillo said. "The ‘what-if’ factor is hurting us. People don’t know if they’ll have a job; don’t know if we’ve reached the bottom of the market; don’t know if more bank failures are imminent; don’t know if housing is the answer at all."

Lawrence Yun, the present NAR economist, has a brighter view for 2011 because of recent numbers. According to NAR figures, existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July.

Existing-home sales (completed transactions that include single-family, townhomes, condominiums and co-ops) rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million in November from 4.43 million in October. However, these stats are 27.9 percent below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time-buyer tax credit.

"Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable," Yun said.

"The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970. Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011."

What would best guarantee sustainability? Jobs. Tuccillo said it would be better to develop new local wrinkles rather than wait on some sort of national proclamation.

"An economic angel may appear," Tuccillo said, "but the most likely source of immediate new jobs is with local new or expanding businesses developing niche products or services based on current economic realities. Things nobody yet has thought of in an evolutionary process to replace outdated or irrelevant products and services.

"As much as possible, we need to spark the creation of jobs at a state and local level and don’t look to the federal government for all the solutions."

Distressed homes (bank-owned homes, short sales, defaults, foreclosures) have been a fairly stable market share, accounting for 33 percent of sales in November. These sales made up 34 percent of the market in October and 33 percent in November 2009.

Foreclosures, which accounted for two-thirds of the distressed-sales share, sold at a median discount of 15 percent in November, while short sales were discounted 10 percent in comparison with traditional home sales.

Given these numbers, there is anecdotal evidence that some present homeowners with significant equity who plan to move in the near future would prefer to rent their next home. They point to flat or modest appreciation, maintenance costs and property taxes for their reasons to rent.

Realtors are quick to counter that notion, citing new surveys to the contrary. According to a survey conducted earlier in the year by, 90 percent of respondents said they had no regrets buying their current home.

A recent Fannie Mae survey found that most Americans — both those who currently own their homes and those who rent — strongly aspire to own a home and to maintain homeownership.

"We believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream," said Ron Phipps, NAR president.

"Able and willing" usually means the ability to pay the monthly mortgage.

"During past downturns, there has been an angel in the wings ready to propel the economy forward," Tuccillo said. "Housing built us out of the tech bust, tech pulled us out of the aerospace bust, aerospace flew us out of the S&L bust. This time there is no apparent growth engine — yet."

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