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Tuesday, January 10, 2012

Gary's Predictions for Real Estate in 2012

These are my opinions....  At least I don't sugar coat like others.  I am always upfront with people.
These are based on national data. Your location might do worse or better. I hope better. Nevada County, Placer County, CA and Olympia, WA are desirable areas.

Home prices will fall another 5% through Q2 before bottoming toward year's end.
Prices are already on a downward trajectory, as foreclosure inventories rise. Banks/mortgage servicers are finally working through a huge backlog of delinquent loans, and as those distressed properties come to market, they will consequently lower home prices. With lower conforming-loan levels, as well as a tight lending environment and the possibility of rising mortgage rates, prices will bottom out in the fall.

Foreclosure inventories will rise while new delinquencies remain elevated.
 Inventories will continue to rise, as around three million distressed properties progress to final bank repossession. Banks will likely ramp up the process following the usual holiday slowdown, especially given positive rulings on the MERS front (the auto recorder for so so so many loans for years), and judicial states lifting their moratoria. Foreclosures will come quickly through the winter and spring months then abate toward year's end. The downward pressure on overall home prices will put more borrowers underwater and in turn keep delinquencies elevated, although not much higher than now. 

Rents will rise, as will rental occupancy rates.
Until the employment market really starts cooking, young employees and potential first-time home buyers will remain on the sidelines, waiting for home prices to bottom. That means continued high demand for rental apartments, especially in higher-priced markets. The big question is: When do rents get too high vs. the cost of home ownership and push people back to buying?

Housing starts to be a tale of two markets.
Single-family home building will struggle to stay above a 600,000-unit annualized pace, as builders continue to compete with foreclosed properties. Slight improvement in demand will keep them going, but not by much. Meanwhile, the minimal supply of multi-family apartment buildings will keep investors pouring money into new construction. Builders will respond with increased multi-family starts, not just in trophy markets, but also mid-sized ones where inventories are lower.

Inventories of homes for sale hit a new high this spring.
 They did bounce way up, from a 7.5-month supply in January to a 9.5-month supply in July, but didn't hit a new record. We had no way of knowing the robo-signing foreclosure paperwork scandal would bring foreclosure numbers down so far for so long.

The office and apartment sectors will gain again.
 In office, occupied stock rose in every quarter through Q3, the vacancy rate declined and effective rent was all in positive gains. The apartment sector is on fire, with rents rising every quarter and vacancies falling to a 2006 low.

Spring will tell.
 The season was muted -- at best. Sales didn't surge, nor did they plummet. The robo-signing foreclosure issues really skewed the numbers, as well as damaged consumer sentiment. Home prices gained seasonally, slightly, but fell back again. The tight mortgage market, along with appraisal accuracy issues, plagued real growth.

Just the facts. What agent is going to tell you the real truth? I am one of the few. Other agents may find me negative but someone has to be looking at all the data and tell the truth to others and stop sugarcoating.
But what some find to be bad news may simply find relief in having less uncertainty. While others can gain from information because they will know what to do. And some will really gain because they see opportunity.
Wanna talk? Just email me right now at callgarytoday @

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