Real Estate Recovery or Not?
Real Estate Recovery or Not?
Data, data everywhere data, but what should you believe? Are we on, in the middle, or at the tail of a deflating real estate bubble?
There is A LOT of conflicting data emerging about the 2012 real estate market and 2012 real estate transactions. Case-Shiller has emerged as the leading index of real estate values. The fourth quarter 2011 S&P/Case-Shiller index (1) shows continuing declines in real estate values with quarter over quarter declines of 1.1 - 1.2% and annual declines of 3.0 - 3.4%. RealtyTrac is the leading source of foreclosure data. On January 12, 2012, RealtyTrac published surprisingly good news showing a 33% decline in the number of homes in foreclosure from 2010 to 2011. The National Association of Realtors (NAR) Chief Economist Lawrence is projecting a modest 4.7% increase in real estate transactions with a 2.0% increase in real estate values in 2012 vs. 2011.
So what should you believe? Nearly all data on real estate transactions and real estate values is historical; it does not forecast the future and may not reflect the situation in our local market. Real estate is inherently local, so if the national real estate market is in decline or on the mend, what does that say about our local market? The largest real estate social network ActiveRain Corp surveyed 1,835 real estate agents and real estate brokers in the US and Canada to understand if the real estate market and economy are poised for recovery in 2012, both nationwide and in local markets.
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A Bottom of the American Real Estate Market
American real estate agents expect the US real estate market to be largely flat from 2011 to 2012. Real estate agents predict that real estate values will be flat from 2011 to 2012, signaling a bottom to the real estate market or the end of the real estate bubble. Given historically low interest rates as well as a bottoming of real estate values, real estate agents expect that the number of real estate transactions and new construction starts will increase slightly in 2012. Additionally, real estate agents believe local economies are on the mend and we will see improvements in the economy.
Rental Nation?
With low real estate values, low interest rates and a recovering economy, American real estate agents believe that 2012 is a great time to purchase both single family and multi-family rental properties. Real estate agents feel that single family homes and luxury homes represent great investment opportunities. What did real estate agents think are the worst opportunities in the 2012 real estate market? Due to the glut of inventory in the real estate market due to short-sales and foreclosures, new construction condominiums, new construction single family homes, and land for construction were rated as the worst investment opportunities.
What’s the Problem? The Banks, Stupid!
When polled about the biggest challenges facing the real estate market and economy, real estate agents rated bank related issues the highest. The biggest challenges were: 1) short sales, 2) ability to finance a new home purchase / loan qualifications, and 3) foreclosures. The significant shadow inventory caused by short sales and foreclosures continues to drag on real estate values. Though interest rates are at historical lows, increased loan qualifications are preventing first time home buyers from purchasing homes and current home owners from trading up into new homes.
We would have expected unemployment to be a greater concern to real estate agents. Persistently high unemployment was ONLY the fourth concern to real estate agents, which was surprising given how the poor economy and lack of jobs has dominated the news headlines for the past 24 months.
Local Opportunities, Local Problems
From a local market perspective, the 2012 ActiveRain real estate survey shows markets where real estate agents are significantly more optimistic and others in which real estate agents are concerned about 2012. Based on our survey data, the ActiveRain real estate network has created a real estate confidence index and ranked the top real estate markets.
