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Turning the Corner in 2011 - Improvement in 2011 Housing Market

By
Real Estate Agent with Edina Realty

By Sara Huebener

 

2010 was a Jekyll and Hyde of sorts.   Fortunately, 2011 is predicted by leading REALTOR groups to be a more optimistic market.  Turn In saying this, it is important to note that we should not expect double-digit appreciation rates, lenders throwing money around, the evaporation of the existence of foreclosures and short sales and the finding of buyers to be an easy feat.  Rather, here is what we CAN expect to see:

 1.   Improved Consumer Confidence.  Consumer confidence was hurt the most with loss of jobs.  When this happens, people become more risk averse and stop borrowing money and making large purchases.  We expect this to improve in 2011.

2.   Employment.   Job growth trends have been positive for the past 7 months, and while not moving rapidly, they are moving in the right direction. 

3.  Interest Rates.   The increase in interest rates has often been touted as a positive to the real estate market because it can spur "on-the-fence" buyers to move into action and complete a purchase.   Some, however, believe the low rates will create the opposite effect on the market.  i.e. Those who refinanced into low interest rates will now feel less desire to make a move, as trading their existing low interest rage for a higher rate will not seem as attractive.   In the short-term, we disagree with this view, as those who refinanced more than likely had little plans to make a more in the next 3-5 years anyhow.  From a long-term perspective....absolutely, this could have an effect.

4.  Financing.  We expect contract for deed financing will become increasing popular, particularly as a growing number of people will be unable to obtain a qualified loan from a lending institution.  The reason for this has to do with tightened credit.   Those with solid credit histories should have no problem obtaining a mortgage.  Those who have struggled (or those who perhaps acted irresponsibly) may see setbacks of 3-5 years before they can be qualified to buy a home.  This ultimately takes many would-be buyers out of the market.  As a result, many sellers will be offering contract for deed as a financing alternative to buyers.  Additionally, many buyers may opt for downpayment assistance programs. 

 5.  Appreciation.  Stock-appreciation All the indicators point towards appreciation coming, but not near the rates we once experienced.  We expect appreciation to occur at about the rate of inflation - about 1% annually.   Areas with distressed properties will skew this number.   Savvy buyers are learning that buying distressed properties offers higher appreciation opportunties down the road. 

6.   Closed Sales.   At pre-bubble activity levels, closed sales are lower simply because today's consumer has significantly different household composition and creditworthiness when compared to the consumer just 8 years ago.    Realtor groups expect moderate growth to occur in this area in 2013/2014, as Baby Boomers seek to sell the family home in favor for something more appropriate for their needs. 

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