Josh's 2012 Real Estate Predictions

Nothing is more enjoyable than wildly speculating about what the future holds.  Of course, there is no way to predict with any certainty, but I think there are some underlying trends that will continue into 2012.  So without further ado, here are my 2012 Real Estate Predictions:

1.  Interest rates will remain at historic lows.
This one seems like a slam-dunk, of sorts.  The Federal Reserve has already pledged to keep interest rates at their current level through the end of 2012, and interest rates have fallen about one percent over the past year.  To the left is a chart that depicts Freddie Mac mortgage rates over the past 40 years.  This should provide perspective on just how low current rates are.  However, buyers should not get complacent - interest rates will not stay where they are forever.

2.  Market inventory will continue to fall.
Over the last year, we have seem a dramatic decrease in the amount of homes coming on the market.  In fact, inventory has fallen roughly 30% in just the last year.  Of course, it has fallen 30% from historically high levels and the market still has room to balance out.  My prediction is that we will continue to see the amount of inventory fall, which leads beautifully into my next prediction!

3.  Prices will be flat or slightly higher.
With declining inventory and low interest rates, it is simply a matter of time before we start to see small price increases.  I've actually been predicting price increases on this blog for the last few months, and conditions seem prime for it to happen.  Expect hesitant buyers to start pulling the trigger once news stories begin talking about prices increasing.

4.  Foreclosure rates will fall in 2012.
There are still a considerably high amount of distressed properties on the market, but I suspect the total number will be quite a bit less than in 2011.  Unemployment numbers have continually improved, and the market has already been in full-blown liquidation for the last three years.  Expect the balancing between traditional and distressed listings  to continue in the next year.

Now, let's be clear:  these are fairly innocuous and conservative predictions.  The market will continue to improve this year, just as it did last year and the year before.  We are still not out of the woods yet.  But expect a more vibrant real estate market in 2012 than we saw in 2011. 

Happy 2012 to all my blog followers, and as always, if you have any real estate questions please do not hesitate to contact me!