My Crystal Ball is Still Cracked - 2011

Despite generously acknowledging that my crystal ball is cracked, I cannot help but try to look forward and come up with a few predictions.

This year my crystal ball is not only cracked, it is showing signs of disintegrating!  However, I'm going to give it a try and hope that I'm not so off the mark that I injure myself!

1.  Interest rates will go up.  That's a pretty safe bet.  The current ridiculously low interest rates just cannot continue unless the economy as a whole is completely stagnant.  There are minute signs of economic recovery and a great deal of manipulation of the economy from the government that will ultimately result in higher interest rates.  How high?  Still low is my prediction...look for interest rates to be in the 5's, but low to mid 5's.

2.  Foreclosures will continue.  The rate of foreclosures hitting the market may slow, but there are plenty of homes in pre-foreclosure that will ultimately hit the market.  With the current absorption of properties on the market, we should see bank owned properties continue to come on the market for a few years.

3.  Short sales will continue.  The government has once again tried to revise what I call "rules of engagement" (HAFA), but will that help?  Time will tell.  In the meantime, though, short sales will continue and they will continue to be painful for all parties involved (seller, buyer, agents, banks...everyone!)

4.  The recovery of the housing market is still a ways off.  Jobs are the most important factor in aiding the recovery.  The slight lowering of unemployment is vaguely heartening, but we have a long way to go.

5.  Second home market will see continued improvement.  There are huge bonuses coming out of the financial markets and that money often finds its way into the second home market.  As that's a good part of my market, I'm cautiously excited.

6.  It appears in the southern coastal RI markets, at the very least, home prices have stabilized and are beginning to inch up modestly.  Stress on modestly but up is the right direction.

So, in summary, 2011 should be a bit like 2010.  No appreciable difference.  A little higher mortgage interest,  inventory levels and sales levels about the same as 2010 with maybe an infinitesimal increase in median home prices.

But, remember, my crystal ball has been cracked for a few years!  Here's hoping it will repair itself soon!