Over the last few years home ownership has looked like a bad idea. Home values came to a screeching halt and began the downward spiral. Many homeowners who bought in the belief that traditional market forces could never affect Real Estate were shocked that home values could evaporate. Hind sight is always 20/20 but viewing into the crystal ball to see where we are headed is cloudy at best. As a Real Estate professional, I can only use the tools, data, economic trends and pundits expectations to foresee the future. I want to share what my crystal ball sees as we head into the new year. I will share some opinions from of my best sources and try to illuminate the cloudy future I see. For 2012 I see: An increase in the housing market including new construction starts (which as of November is at its highest level in 19 months 9.3% gain), higher re-sales, slight increase in housing prices (1-2%) based on location. The Department of Real Estate considers a 6 month supply of homes to sell as an optimum number (average in a normal market), we are currently at a 7 month supply. This is down from the worst of the economic crisis when housing prices were at their lowest and there was a huge number of houses on the market. The fewer homes to sell, the greater demand, the higher prices will rise. Keep in mind, all Real Estate is local, not regional or national. Your specific market could be different and your local Realtor® should be consulted. I see a stable interest rate making homeownership beneficial. The Fed does not see inflation as an enemy for 2012 and interest rates should continue at historic lows. Easing of lending standards by the banks driven by Fannie Mae&Freddie; Mac. Banks are sitting on huge cash reserves and will need to lend. A push by the industry to keep homeowners in their homes with help from all sectors, private and governmental. The cost of foreclosures is driving significant changes in the lenders willingness to adopt policies that help keep homeowners stable and in their homes. Although the release of bank owned properties onto the market will continue to affect home values, it will not devastate the market as it has the past 5 years. Banks are seeing the market change and they also wish to increase profitability and increase their bottom line by having their investments increase in value. We have seen the banks willing to rent REOs (bank owned properties) to allow the market to correct itself and release the inventory at a more lucrative time or at a slower pace. Banks are now willing to work with Short Sales due to costs of foreclosures. Renting costs are going up 3-5% because of demand. A 50% increase in Multifamily construction is in full swing because people are renting vs. buying. Although, home ownership does not fit into every portfolio, the numbers suggest otherwise. Here is the 2009 Rent Vs. Buy chart from the California Association Of Realtors: Even with a reasonable expectation 1-2% of increased values, it is hard to make any argument for renting vs. buying. As the construction industry tries to ramp up again, it will increase job production which will spur more demand on housing. Rising population will also play a key role in housing demand. In a normal market 1.2 million new households are formed every year. This has been constrained and will again have a significant impact on market forces. There will be continued stress on housing bubble markets that were over built at the peak times…Las Vegas…Phoenix etc. As I have said, my crystal ball is based on specific criteria both nation-wide and local. The gloom and doom from the media seems to be abating. The news media in all its forms is starting to get the point, they have been part of the problem and should be part of the solution. I never wish to bury my head in the sand but at the same time I don’t believe everything I hear or read. The media’s habit of pouncing on and enhancing the negative has, in part, fueled this economic downturn. There will always be the doom sayers prophesying the end to home ownership but I foresee a bright future for 2012 and beyond. From George Friedmans book:The Next Decade: Where We’ve Been… And Where We’re Going “Forecasting a century is the art of recognizing the impossible, then eliminating from consideration all the events that, at least logically, aren’t going to happen. The reason is, as Sherlock Holmes put it, “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.” Michael E. Anderson, Broker Associate, ABR, RSPS Anderson Home Pros Real Estate Beautiful California Central Coast
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