Market Prediction - 2012

This time of year I oftentimes get asked the question “What do you think will happen to the real estate market next year?”. I thought I’d take a moment and let you know my thoughts on where we are and where we might be headed in the not so distant future.
With the Euro in question, a U.S. presidential election and a sizable (and arguably unknown) portion of inventory being controlled by banking institutions it is very difficult to hypothesize what will happen to our local market. What we can do is look backwards and note that real estate prices generally went down across the board in 2011. On average, prices fell by around 5.6 percent over the year, with the national average house price sitting at $170,000. While it’s not been a great year, the downturn has slowed somewhat, indicating a possible momentum shift which could swing the price of real estate upwards. Unemployment continues to dampen our local economy with most recent figures reporting 15.7% for our county. A survey conducted by HouseLogic.com asked the question “What issue/ area will have the greatest impact on your vote in 2012?”:
Jobs/unemployment – 54% Housing – 27% National security – 8%
Healthcare – 4% Energy/Environment – 2% Other – 4%
It is very clear that the focus of America is on employment. With an improvement in jobs will come consumer confidence and an increased participation in the purchase of housing. But until then we will continue to face a difficult and constricted real estate market. It is my belief, however, that we are nearing the bottom. We will likely continue to see small decreases in values, with sporadic months reporting no change, through the first two quarters of 2012. The third quarter of 2012 is when I might anticipate we look backwards and notice the trough of the market has passed with a very gradual but consistent upward trend continuing into 2013.
Currently low values coupled with historically low interest rates maintains a huge buying incentive - now is the time to buy. "Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year," said Lawrence Yun, Chief Economist and Senior Vice President of Research for the National Association of REALTORS®. "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970."

It is my sincere hope that 2012 will bring us some much needed change and upward swing in both our economy and the housing market. My sights are set on the third quarter…