As we close the books on 2011, we can say it was better year than 2010 for activity in real estate. Prices continued to drift lower for us, primarily brought down by distressed sales. Every agent I have has positive feelings about the year 2012. What’s even more shocking is that bank executives I have been talking to are positive for the first time since 2008. If you are a looking to perfectly time a long-term purchase of real estate, then this might well be the year to do it. Let’s get right to the nuts and bolts of why I believe 2012 is going to be remembered as a great year to buy real estate.
Top 10 reasons why you should be optimistic about the real estate market in 2012.
- According to Case Shiller in 2012, 372 of the 384 real estate markets they track are projected to have housing prices appreciate, while only 12 markets are expected to see prices decline.
- In markets that have had the largest price drops, those markets now have the most significant increases in affordability. For us in Florida, Miami is most notable where the ratio of mortgage payment to family income has dropped from its height of 59% in 2007 to 19% today. That means people are paying 1/3 of what they did just four years ago to own their homes.
- Apartment move outs to buy homes are escalating. Currently, measured at a six-quarter high of 13.5% by Zelman and Associates. That means that 13 out of every 100 renters moving out of apartments are doing so to buy a new home.
- Low prices combined with historically low interest rates make 2012 a once-in-a-generation opportunity to buy real estate and build wealth. Look for this trend to continue only through 2012.
- Wall Street wants in! That’s right. Hedge fund managers are trying to figure out how to capitalize on the opportunities in the single family home market. There is some irony here. Wall Street is trying to occupy us. You should know that they are going to do it, charge some fees, and then ask your fund manager to buy in with your money. Why not cut out at least two middlemen?
- This month’s headline from Credit Suisse monthly survey of real estate agents is a telling sign of things to come. “Affordability Slowly Pulls Wary Buyers back!”
- 2012 is when CNBC’s Jim Kramer originally forecasted the housing crisis to end. I know he has revised this but the two things you need to remember are that Wall Street generally worries more about new home starts and builder stocks then the existing housing market. Then just remember what your old SAT test prep instructor preached, “Always stick with your first answer!”
- According to local mortgage guru Mike Jones at Alarion Mortgage, “Rates look to continue to decline as the fed works to reduce rate in the commercial backed securities(CMBS) market as part of QE3.” Can rates drop below 4%? It’s possible. While I’m not qualified to say there is a bubble that is going to burst, it sure looks like irrational behavior is driving long-term rates that low. That’s behavior that real estate buyers should capitalize on with long-term fixed rates.
- Job Growth looks strong as retailers and small business entrepreneurs now lean from the recession look to take on new locations and bring new jobs into our communities.
- Of course ultimately you have heard it over and over that real estate markets are local. So for us in Gainesville, FL, 2012 forecasts look good!
Home prices: Your local forecast 384 markets tracked
Forecast Change: 2nd Quarter, 2011 – 2nd Quarter, 2012 = -5.6%
Forecast Change: 2nd Quarter, 2012 – 2nd Quarter, 2013 = +1.9%
Median Family Income (2010) = $53,100
Median Home Price (2nd Quarter 2011) = $155,000
Change in Home Prices: 2nd Quarter, 2010 – 2nd Quarter, 2011 = -10.5%
Worst 1-Year Home Price Change (From 1980-2011) = 1st Quarter, 2007 (-12.3%)