As we conclude 2011 and head into 2012, Virginia’s housing market will likely be strengthened by low interest rates, rising residential rental rates, pent-up demand, and an improving household balance sheet based on increases in household saving habits.

Despite these tailwinds, however, a return to stability in the housing market may be slowed by employment trends, low consumer confidence, tight lending and underwriting standards and significant policy issues. Recent policy decisions or discussions that could impact Virginia’s housing market include a possible elimination of the mortgage interest deduction, GSE reform, changes in FHA loan limits and a new QRM proposal (Qualified Residential Mortgage) that would require lenders to retain 5 percent of the value of the loans they originate (excluding Fannie and Freddie) unless the borrowers have a 20% down payment