Happy New Year! There is a lot of speculation surrounding the 2012 real estate market and what it will bring for buyers and sellers alike. While we do not have a crystal ball, we can take what we saw in 2011, and examine some emerging trends. Here are our predictions for the 2012 market:
- Days-on-market will decrease. In 2011, days-on-market averaged 4-6 months for competitively priced homes. By year end, sales rates increased and inventory levels shrunk, finally bringing us close to a balanced market. (Less than 5 months of supply = balanced market.)
- Buyers will remain active. Interest rates remain at historic lows, and are expected to stay low through 2012. Affordability is at an all time high. Buyers will continue to look but many won’t be in a hurry.
- Big changes are coming to foreclosures, with the intent being to decrease vacancy levels and prevent vandalism. Foreclosure moratoriums and backlogged processing of foreclosures have significantly slowed the rate in which foreclosures hit the market in 2011. Hence, “shadow inventory” – foreclosed homes that have not been listed for sale by the banks - is very high.
- Banks are expected to begin functioning as landlords, renting out foreclosed homes and keeping them off the market for a period of time. Locally, we are already seeing this in some cases where smaller banks are involved.
- HUD is permitting buyers to continue to use FHA-insured financing to purchase HUD/ bank-owned properties, no matter how long the homeowner has held the title. (Under normal circumstances, HUD has a no-flipping policy.) This extension is being put into place to keep investors in the market and help absorb inventory more quickly. See our blog at www.WestSavageBlog.com for more on this topic.
- Some banks are pilot-testing programs where they pay sellers to sell short, vs. foreclose, with incentive payments ranging from $3,000 to $30,000. If programs of this nature take hold in our market, it will reduce our foreclosure inventory and increase short sale inventory. This will remain the most volatile and frustrating part of our market.
- Pricing will “bob” along. All aspects of the previous point considered, shadow inventory is expected to begin hitting the market this year. As a result we do not expect to see any notable appreciation. Stability remains the goal.
We hope 2011 was a great year for you and your family. If you know of anyone looking to buy or sell a home, or if we can do anything to help with the success of your business, please do not hesitate to contact us.
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