The 2011 housing market has been one of the most volatile Real Estate markets I have ever seen. The uncertainty concerning the U.S. economy has been the driving force behind most of the decisions that home buyers and sellers have been making. The year started off with an abundance of caution, so even with government program after government program the housing market seemed to be stagnant. Irrational, fear driven behavior has been the norm for most of the early part of the year with over 60% of pending home sales falling out of escrow. Lack of proper education as to how the real estate market really works was another problem. This country has a six second mentality and the average home buyer or seller has not done enough to educate themselves on how the real estate market works.
In the early part of 2011, the economic data was so bad, that even with historically low interest rates and very affordable home prices, by California standards, the housing market seemed to be completely frozen. The threat of a double dip recession, and historically high unemployment rates, not to mention a hyper volatile stock market made the beginning of this year absolutely astonishing. The only people who were buying homes in the early part of 2011 were investors who were trying to cash in on what I was calling a fear driven market.
I would like to take a second to examine some the six biggest misconceptions of 2011.
1. The banks are not lending.
2. My home will never appraise.
3. Nobody’s buying homes right now.
4. There are a lot of homes on the market.
5. The housing market is going to go down another 20%
6. The banks are going to flood the market with foreclosures.
In my opinion none of the six statements are true. If you have read any of my previous blogs you know that I believe that this market is almost completely driven by public perception.
The Banks are lending you just need to know which banks to go to. New home appraisals are getting much easier to obtain, in fact out of all of my transactions this year I have only had one home that did not appraise. There are a lot of home buyers looking for a home and right now. The housing inventory is the lowest we have seen since the peak in 2006.The housing market is more than likely at or near its bottom. The banks will more than likely not flood the market with foreclosures, as that is counterintuitive to how banks work. Banks are in business to make money, and when they sell foreclosed property they lose money.
In my last several blogs I have been saying that if you remove the fear factor from this market it is going to rebound very quickly. The economic data has been perceived as very positive in the last several months, and the fear of losing out on these interest rates has pushed the reluctant home buyer over the edge.
So now we are seeing multiple offers on any home that appears to be priced well. Pending home sales have been up for the last several months; in fact the pending home sales are at a 19 month high for November. The pending home sales were up over 7% nationally and almost 14% in the west and existing home sales for October were up 5%.
So what is going on? Are we out of the proverbial woods? Has the market truly turned around? The answer is not so simple and I don’t pretend to have a crystal ball, however this is my 2012 prediction!
As the housing inventory stays tight and interest rates stay between 4% and 5 % for the near future the activity should remain fairly robust, that’s the good news! The thing to remember is that Real estate is almost completely supply and demand driven, so as the sellers realize that they can sell their homes and as we get closer to spring you should see more homes going on the market and the activity will start to slow again. In short 2012 should be another up and down year and the overall trend should be somewhat neutral. There are a few things to consider; the 2012 presidential election, a very volatile European economy, and uncertain fed policy. Another thing to remember is that if you’re waiting for home prices to go up so you can make more money on the sale of your home, you may be making a mistake. When prices go up on your current home they will also go up on the home you wish to purchase. The interest rates will also eventually go up and that means the additional money you may have made on your sale will probably be given back on your purchase.
The housing market is changing very rapidly and the only thing that is certain is what you know right now at this moment. Don’t try to time the market; take advantage of the current housing situation. My strongest advice is to be educated, informed and in the know. Make strong and informed decisions and remember a home is a place to live, but it is also one of your largest financial investments of your life.
I wish all of my readers a happy and blessed new year!
If you are interested in a free, no obligation buyers consultation or listing presentation please contact The Barasch Group