December is usually the time of year when real estate pundits and economists like to publish their predictions for the coming year. Since Iam neither a pundit nor an economist, I do things a bit differently. Unlike these folks, I deal with people on a daily basis. My phone rings when people want to "deal" and it is dead silent when they are not in the mood. So I wait until the first week of January to see what kind of year it is going to be. If things are crazy the first week then most likely it will be a good year. Today is January 5th and I already have 4 new clients--so Iam feeling pretty good about 2011.
If you need something more tangible, then I will give you a few highlight predictions presented by economist Leslie Appleton Young:
1) Modest gains in prices and volume in 2011. Why?
- Equity sellers are getting the money out of their homes and moving into bigger and better homes. They figure whatever loses they realize on the sale of their home, they will make up on the purchase of their "move up" property
- Investors are gobbling up cheap homes for long term rentals
- First time buyers are getting into the market because they can finally afford it. Prices are low enough and FHA ( 3.5% downpayment) loans make the downpayment do-able.
- Unemployment in CA is slightly lower than during 2010 and several sectors are seeing actual GROWTH ( ex: hospitality)
- Interest rates are low
2) Interest rates holding steady. Unless the GDP grows at a steady pace for a while, there is little chance the Fed will increase rates
3) Low Invetory. It is crazy to think that with all of the distressed homes out there, that we are having an invetory problem. Surprisingly enough, that is the case. Why?
- Roughly 15% of short sales close sucessfully, the rest go back to the bank and add to the famous "shadow inventory" we have been hearing about for years.
- Sellers are not really motivated to sell unless they have to OR have equity in their homes.
4) Expect Multiple Offers in 2011. YES---don't shoot the messenger. In 2010, 50% of all transactions had multiple offers. Iam totally NOT kidding about this. From my experience, this is mostly in the lower price ranges, but I was even in a multiple offer situation on a $730,000 tear down in Woodland Hills.
I hope you enjoyed this little taste about what I think is to come in 2011. Since market value is based on what a a buyer would do, I think the most important opinion is actually YOURS. So what do you think will happen in 2011? Feel free to comment.
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