As a number of government agencies, such as the Consumer Financial Protection Bureau, implement new lending regulation meant to make the mortgage market a safer place for borrowers, many industry experts are concerned this will dampen the real estate recovery.
However, one financial powerhouse believes the housing market will be fine, and could emerge stronger than ever.
By the end of 2012, home prices are expected to be between 7 and 9 percent higher than they were a year earlier, according to Morgan Stanley. In a scenario in which the economy takes another hit in the final months of 2012, home price appreciation could be closer to 5 percent, but this is unlikely.
Additionally, the Federal Reserve's recent decision to try to keep mortgage rates affordable, paired with strict lending standards, could keep demand at an elevated level for quite some time.
The Federal Housing Finance Agency, which oversees mortgage activity at Fannie Mae and Freddie Mac, is trying to reduce the roles the GSEs play in the industry. This initiative could promote additional lending in the private sector, and would be beneficial for both a large and small bank.