What to Expect for the Housing Market in 2012

It's been a pretty long ride down from the meteoric highs the housing market hit in the boom years. Who knew more than five years later, Americans would still be trying to shake off the one of the worst financial hangovers the country has ever known.

Millions of homes have been foreclosed on and millions more Americans have underwater mortgages, the lasting legacy of the housing bubble that grossly overinflated home values. Now, living in homes they can't sell, Americans today are "stuck." Stuck financially, stuck in their homes, and stuck wondering when things will get better.

Is 2012 the year the housing market turns around? Of course, no one can say for sure, but plenty of economists say signals are pointing in the right direction.

"It has become increasingly apparent that the pieces for a housing rebound next year are beginning to fall into place," wrote Barclays Capital analyst Stephen Kim in a recent report.

Still, obstacles remain for the housing market. Here's look at what to expect in 2012:

Home prices bottom out. Nationally, home prices have plummeted almost 24 percent off of their peak, and most economists expect prices to continue to decline as much as 4 or 5 percent before leveling out in late 2012.

While experts don't expect a rapid conclusion to the saga of ever-declining home prices, "the trend of eroding expectations for the housing market recovery has come to a halt," said Terry Loebs, founder of Pulsenomics.

More foreclosures. Foreclosure filings have edged downward over the past few months, suggesting improvement in clearing the gigantic inventory of distressed properties in the United States. But according to a recent report from Realty Trac, a new wave of foreclosures could hit the market in early 2012.

Foreclosures have fallen near the end of this year due to eviction moratoriums during the holiday season and continued hold-ups in the legal process as states' attorneys negotiate with mortgage servicers over foreclosure practices.

Clarity on that issue should restart the process and begin flushing homes through the foreclosure pipeline. That's likely to contribute to further prices declines in some markets, particularly those affected by the foreclosure epidemic.

Low mortgage rates. Rock-bottom low mortgage rates are likely here to stay, at least through the first half of 2012, in large part due to the Fed's commitment to keep interest rates low to spur borrowing.

All bets are off, though, if politicians come to a decision on the qualified residential mortgage measure included in the Dodd-Frank financial reform act. "One of the most substantial things that will impact the market will be the definition of the qualified residential mortgage," says Cameron Findlay, chief economist at LendingTree. "That has the potential of entirely changing the way mortgage rates are offered to consumers and it has the risk of raising rates by about 1.25 percent."

Rising rents. The foreclosure crisis has converted millions of previous homeowners to renters and many would-be homebuyers have continued to stay on the sidelines and rent, waiting for prices to "hit bottom" before jumping into the housing market fray.

With more demand comes rising rents, a trend already being seen in many metro areas across the nation. Ultimately that can be a good thing for the housing market, since it generally tips more people into buying homes.

"Rising rents have traditionally been a good factor for home sales," stated Lawrence Yun, chief economist at the National Association of Realtors.

Also, with rental demand heightened, real estate investors' ears have perked up. With prices in many metro areas at historic lows, investors are taking advantage and scooping up properties to convert into rentals.

Are Emerging Markets Decoupling from the Developed World?

Our generation has seen and heard its fair share of bunk economic theories. These are high-sounding theories that are often touted by recognized investors or higher learning institutions - and for that reason, they mostly remain unchallenged. At the top of the list is economic decoupling between emerging and developed countries.

Countries that are in the midst of rapid business growth and industrialization are generally referred to as 'emerging markets.' With a combined population of almost 2.5 billion people, China and India are among the largest emerging market countries.

The theory behind economic decoupling is that emerging market countries can prosper and remain unaffected by adverse financial conditions elsewhere, particularly developed countries. Decoupling has been heavily promoted over the past several years, especially by academic types in the mainstream press.

While decoupling may sound like a plausible idea, the performance for emerging market stocks this year doesn't support that view.

Emerging market stocks are down 16.50 percent year-to-date compared to flat performance for U.S. stocks and a 10 percent loss for developed stocks.

What about mega emerging market countries like Brazil, Russia, India, and China? As a group, BRIC country stocks are down 14.90 percent since the beginning of the year.

Stocks in India, Russia, and Brazil are in bear market territory, down between 20 to 30 percent in value. Based upon the stock market's performance, the theory of economic decoupling isn't holding up and neither is the argument of a soft landing.

The high octane growth from emerging countries that analysts have been preaching is not as high or as fast as previously thought. China's Consumer Price Index (CPI) and Producer Price Index (PPI) for November were a big disappointment. The year-over-year (y/y) results were weaker than projected.

CPI was ahead just 4.2% compared to 5.5% in November 2010 and PPI for the same period was 2.7% compared to 5%. Also, declines in both China's CPI and PPI were worse than what economists were projecting.

In the manufacturing sector, China's growth has slowed to its slowest level in two years and home sales along with exports are ebbing. Premier Wen Jiabao's formula to save China and the rest of the world by creating a lending boom is both odd and unimaginative. The strategy did not work in developed economies like the U.S. - and won't work elsewhere.

Europe's financial crisis has taught us that a financial crisis doesn't take a holiday nor does it play favorites. The problems that began with fringe countries like Greece and Portugal have now infected France and Germany. How does this relate to emerging markets?

Emerging market countries are not invincible, as the enthusiastic academics paint them to be.

Rather than buying into the popular theory of economic decoupling, investors should analyze the facts and remain skeptical.

FluoroPharma Medical Announces Appointment to Board of Directors

FluoroPharma Medical, a biopharmaceutical company providing proprietary PET imaging products to evaluate cardiac disease at the cellular and molecular levels, announced today that it has appointed Lawrence Atinsky to its Board of Directors. The appointment is effective January 3, 2012.

Mr. Atinsky has worked closely with a number of biotechnology companies over the past ten years, helping them execute their strategic growth plans, and is currently a partner at Ascent Biomedical Ventures. Ascent is a venture capital firm targeting early stage biomedical technology companies developing medical devices, biopharmaceuticals, healthcare services, and information technology. Prior to joining Ascent, Mr. Atinsky was an attorney at Skadden Arps where he specialized in mergers and acquisitions.

FluoroPharma President and CEO, Thijs Spoor, commented on the appointment: "I am delighted to welcome Lawrence to the FluoroPharma Board. His legal background, along with his extensive biotech business experience, brings invaluable knowledge and will complement the considerable expertise of the Board."

FluoroPharma's focus is the development of breakthrough positron emission tomography (PET) imaging agents for the efficient detection and assessment of acute and chronic forms of coronary artery disease. The goal is to enable personalized medicine through advanced imaging products that will help the medical community diagnose disease more accurately at the earliest stages, leading to more effective treatment, management, and better patient outcomes.