The question I have been asked most often in the last few weeks is: What is the outlook for the real estate market in 2012?
It’s an interesting question, because there are many dynamic factors involved in the state of housing in North America.
First and foremost are the immutable laws of supply and demand. If there is more product than there are consumers, the market will continue to decline.
And while we can’t change the rules of the axiom, we can certainly control the variables. Either the supply of homes for sale has to be reduced or the number of buyers has to increase, a bit of both would be great.
The best way to increase demand is to make mortgages easier to obtain. We don’t want to return to the debacle of the early 2000’s but a little sanity in the underwriting process would help.
Many consumers with good credit scores want to buy houses but they can’t because of guidelines that have caused such trepidation regarding default that the money is kept safely tucked away and out of the hands of would-be buyers.
Alternatively, we need to figure out more ways to keep people in their houses that want to stay but have suffered a financial or personal setback. The flood of foreclosures continues, and many of the displaced homeowners that I have spoken indicated that they tried to work out an arrangement with their mortgage holders but were unsuccessful.
Unfortunately, nothing has been done to significantly affect real estate in the upcoming year. And so any real estate recovery is totally dependent on the economy as a whole. As the economy goes, and as jobs are created, so goes the real estate market.
And since 2012 is an Presidential election year, one should expect some temporary economic remedies being set into action to skew the numbers by November.
As a result, the real estate market should fare slightly better in the second and third quarters of 2012. The market will be far from robust, but it will be a bit stronger than 2011.
2012 offers some promise for better times ahead. However, just how much better it will be is still anybody’s guess.
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