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Housing and Economic Predictions for 2012 and Beyond

By
Services for Real Estate Pros with TheHousingGuru.com

clock with hands approaching 2012As 2011 draws to a close, I look to past and current events to provide insights for my housing and economic predictions for 2012 and beyond; and what I see is both problematic and disheartening. Having experienced four years of instability in the housing market and with unemployment remaining at levels not seen since the Great Depression, many look to the coming year with expectations that the effects of this recession will finally lose their grip on the U.S. economy.

 

While it’s impossible in a few paragraphs to properly analyze the numerous issues affecting the economy, I will briefly describe those I expect most likely to impact the real estate market in the coming year.

 

HOUSING: The good news in housing is that the population is continuing to grow, albeit at a slower than normal rate—more people means more housing demand. The bad news, however, is that many of those seeking housing are choosing to rent; the market has already seen an increase in the number of renters and a corresponding decrease in those seeking to purchase.

 

Additionally, a continuing and more structural problem for housing in the near-term are those millions who are locked into their homes as values remain too low for sellers to cash out with sufficient money for a down-payment on a new home. The housing market will suffer the effects of this issue well into the decade. The housing stimulus that is needed—the only stimulus that could have a positive and lasting impact—is the creation of millions of jobs. Until we consistently see 250 - 300 thousand jobs added each month, there can be no housing recovery.  

 

FORECLOSURES: We are currently seeing an increase in the numbers of bank-approved short sales and foreclosures, and that number will likely remain high throughout 2012 as lenders accelerate the process. In Orlando, for instance, distress sales account for as much as two-thirds of the market, and in many parts of Southern California they represent one-half of all sales—good for reducing the “shadow” inventory, but bad for sellers struggling to compete.

 

Although the number of homes in default remains high and lenders, especially BofA seem to be ramping up foreclosures, I doubt we’ll see a dramatic surge for the year. Based on information I’ve seen, I would anticipate another year of approximately 2 - 2.5 million foreclosures with those remaining in the “shadows” to be spread throughout 2013 – 2015, for it still takes almost two years to process a foreclosure. If my numbers prove accurate, home prices cannot experience the rebound anticipated by some housing “experts” or millions of hopeful homeowners.     

 

INTEREST RATES: While the FED has, for the most part, kept the effects of inflation somewhat limited, the risk of significant inflation and a corresponding increase in interest rates remains on the horizon. However, as long as the nation continues to be mired in recession or recession-like symptoms, that horizon is pushed into the future. For 2012 interest rates should stay at very attractive levels, with mortgage rates in the 4% - 4.5% range throughout the year.  

 

EMPLOYMENT: This is THE problem issue for both the Administration and the economy in general, and it’s not expected to improve significantly throughout 2012. Throwing billions into ill-conceived make-work programs and extending unemployment benefits has done little to stimulate jobs growth, and I doubt we’ll see notable progress throughout the coming year. We could, in fact, see jobless rates climb even higher (Of course, most realize the REAL numbers are already higher than those reported by the BLS.) if the economy falls into another recession or other negative influences occur.

 

The core issue of our faltering economy is the inability of government to “create” jobs. The best they can do is stimulate real jobs growth; and that has yet to occur.

 

POLITICS: The best term I can apply to my view of politics for both the present and foreseeable future is “disgusting.” We have a serious deficit of leadership that applies equally to both political parties. Sadly, this condition will not change as long as we send the same tired political “hacks” to DC. What is needed isn’t just a change of faces, but a revolution in the way government is run. Our nation cannot afford to remain gridlocked by partisanship, crony capitalism, lobbyist influence and corruption. It is time for change, but many Americans have yet to accept their responsibility in effecting that change. 

 

Those who doubt my negative assessment of our political system or the lack of participation by our citizenry need only observe the coming election. Politicians will continue to pander to an electorate who willingly remain uninformed, and we’ll likely see political deceit carried to new highs/lows.

 

SOCIAL UNREST: While not normally associated with housing, I’ve added this category because I anticipate a continuation, perhaps even an increase in the level of frustration expressed by the masses. Millions have lost confidence in both government and institutions, and as the protests grow, they are likely to grow more violent and disruptive; and the ensuing chaos could seriously impact an economy teetering on the edge.

 

WORLD EVENTS: Another problem area facing our economy with the potential to wreak havoc on both housing and our economy is the growing world-wide unrest festering across the globe. The effects of European monetary crises and the instability of the European Union have already been felt here in the U. S., and it’s unlikely the efforts towards stability will be successful in the short term.  Similarly, unrest in the Middle East could easily lead to instability or significant increases in oil prices, a factor with the potential to bring our economy to a screeching halt.

 

SYNOPSIS: Ultimately, as I review my housing and economic predictions for 2012 and beyond, I expect the coming year to be one of turmoil and uncertainty, with a better than fifty percent chance that the U.S. will slip into another recession. There are just too many negative factors threatening our economy. And with an election drawing near, the Administration would like to see positive results from the trillions spent attempting stabilize the economy; but efforts to date have been either ill-timed or ill-advised and unable to positively impact unemployment, housing or consumer confidence. I have scant hope of a sudden change in tactics or results.

 

Unless our political “leaders” abandon partisan politics and choose to seriously address our nation’s problems—a feat more unlikely than aerobatic swine—the country will remain in a prolonged economic and social struggle the results of which could be catastrophic. And regardless of the actions taken in DC, I see little possibility of a return to the prosperity of previous decades.      

 

Finally, there are those potential events which, should they occur, could dramatically alter the U. S. economic climate. Events such as a significant terrorist attack, war or major military action in the Middle East, major natural disaster or a spike in oil prices, could make the above a meaningless exercise, overshadowed by consequences beyond our control.  And while I wish the best for our country and its economy, I remain prepared for the worst.      

 

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News
 

 

Originally posted at: www.TheHousingGuruBlog.com – “Housing and Economic Predictions for 2012 and Beyond”

 

 

 

Comments (14)

Will Handley
Progressive Inspection Service - San Juan Capistrano, CA
Certified Master Inspection Services

Not a rosy picture of our industry to be sure.  To be successful in this industry we must be realists and conform to market conditions.  Those of us who do will survive.  The rest of our steadfast stay the course professionals are in for a rude awakening...

Nov 27, 2011 01:14 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Will - You grasp the reality of our current situation. We must recognize and adjust to the changing market.

Nov 27, 2011 01:55 PM
Nancy Conner
Olympia, WA
Olympia/Thurston County WA
I totally agree that jobs are key to any true, lasting recovery. And though I wish I saw a rosier forecast for 2012, I think your analysis is pretty darn accurate. The most frustrating aspect is that so many people seem uncaring about the really serious, complex issues our country faces. Worrisome!
Nov 27, 2011 02:13 PM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Sounds like you did your home work but the best thought is for us to send all the politicians that have been in office for over 12 years home, we need new energetic new blood in th ehouse and senate along with a leader in the white house.

Nov 27, 2011 02:21 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Nancy - I agree on the troubling aspects of indifference; that has the potential to keep us from facing real solutions.

Joyce - Overall, I'm disheartened by the "politics of politics." We desperately need leadership.

Nov 27, 2011 03:26 PM
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

"Tired hacks" is a pretty good term John.  And this is a very adept and complete analysis.  As for the rest, let's hope for change.

Nov 27, 2011 08:54 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Jay - Thanks! And yes I'm "hoping" for lots of change.

Nov 27, 2011 10:25 PM
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

John, 

Hard to believe we are ready for 2012 predictions, but I liked your post.  (Well, I didn't like that we are most likely going to have another recession.  I would just rather be prepared for that and work from there.)

All the best, Michelle

Nov 28, 2011 12:44 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Michelle - Thanks for comments. Unfortunately, whether we go into full blown recession or not, the economy will be "sick" for some time.

Nov 28, 2011 02:37 PM
Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

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Nov 28, 2011 11:19 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Nicholas - Thanks!

Nov 29, 2011 11:43 AM
Mary Macy
Top Agents Atlanta Metro - Roswell, GA
Top Agents Atlanta Metro

Guess that this means we have to just make the most of each and every day.  Have joy fromt he little things and be thankful for being vertical.  I have easy rules for happiness right now.

Dec 07, 2011 09:53 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Mary - I think you're on the right track, and I suspect you'll be able to create success along the way. Hope 2012 is a great year for you.

Dec 07, 2011 02:56 PM
1~Judi Barrett
Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

John, I believe the one that thing that concerns me more than anything else is the polical unrest and economic downturn that is worldwide.. so much of what happens is no longer confined in scope of effect to just the country that it is taking place in..  

Dec 20, 2011 02:43 PM