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2012 Real Estate Forecast…What to Do?

I am fortunate to have a view of the real estate market which most folks just don’t have. I sell many homes each year and talk to mortgage lenders, buyers, sellers, home inspectors, stagers, contractors and so many others connected in some fashion to the housing market. In my conversations we discuss the current state of the market as well as their prediction or feel for the future based on their client’s comments and views of the present health of our local real estate market as well as the expectations for the future. I want to share those views with you, the reader, so you can make plans for your home sale when the time is right for you. Also, you can share this information with your children and grandchildren who may be on the sidelines waiting for the right time to jump into the housing market for their very first purchase.

The overwhelming sentiment is that we will not see appreciable appreciation of our single family homes for another two to three years. But the good news is that price depreciation is slowing down to a single digit decline and moving towards stabilization. That is very good news, as prices have fallen since 2006. That has been a 5 year fall in home values for an average decline of 20-40%, depending on location. Inventory of homes for sale is also falling which is a sign of recovery. Therefore, do we wait for that moment when we know the bottom is here and prices are on the rise? My experience shows me that the exact moment of price appreciation is never truly known at the time it is happening. It is such a gradual process that we can only time the market by looking backwards, which is very difficult to do! When looking at history, patterns are clear and easy to see, but when in the moment very difficult to know for sure. The complicating factor to timing the market is interest rates. Even if we wait until the perfect time to sell or buy, interest rates can rise, causing our timing to falter. For every 1% of interest rate rise, buyers lose 10% of purchasing power. In other words, if the interest rate rises 1%, a buyer would have to pay 10% less for the same payment. Therefore, prices may begin to rise, then fall a bit if rates go up. This is capitalism at is core.

Another factor that we don’t see at the moment is the many sellers waiting on the sidelines to put their home on the market. Once recovery is felt, many homeowners will put their home on the market as they have been on the sidelines for the past 5 years waiting for the right moment to sell. This acceleration of inventory may stunt the growth of the home sale market temporarily until this new inventory surge is absorbed. Add to that the large number of baby boomers waiting to downsize from larger homes. This may cause homes with great square footage to fall in price until they too are absorbed into the market.

The bottom line is that our real estate market will show positive signs of recovery, then may fall back and then recover and move forward. This start and stop market recovery and slowdown will probably be the norm of our real estate market for a few more years. Therefore, prices will be somewhat stagnant for at least 2 more years with prices remaining stable without decline.

This housing stability will offer great opportunity for both buyers and sellers. This is a rare type of market where neither purchaser nor home seller may have the advantage. That is a great time for buyers as they can feel good about the price they pay since prices will not be falling or rising. One of the great fears of today’s first time buyers is purchasing a home at today’s prices and being under water a year later! Stability is critical to buyer’s confidence in their first home purchase.

As a seller, one can remain confident that the price they attract will not shoot up as in the boom years, causing upset when feeling they should have just waited to cash in on the huge appreciation seen in the 2000-2006 years. One can remain fairly certain that the price obtained in 2012 will be somewhat close to the price obtained in 2014. So why wait if a lifestyle can be improved today by selling a home that no longer meets today’s needs.

Stable prices are here at this time for buyers or sellers. As a seller, understanding today’s buyer is critical to achieving success in one’s home sale. As a buyer, conditions have never been better as to inventory, interest rates, and price. Therefore, look at lifestyle as the determining factor for making your buy or sell decision in real estate. You will be considered ‘lucky’ for making that decision when afforded the luxury of looking back in time as to how you timed your decision as to the constantly changing market!

About Bruce Nemovitz

Bruce Nemovitz has been a Realtor in the Milwaukee area for more than thirty-five years. He is in expert in helping senior parents moving into a different lifestyle.
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