The real estate market in 2012 is finally starting to see the light at the end of the tunnel.
We are going to see a shift and settlement in several depressed areas. New ideas and concepts are emerging, while other ones are being reinforced and perfected.
According to the National Association of Realtors the inventory of residential real estate is down more than 20% from a year ago and median list prices are up an average of 4% nationwide. Most individual markets have reported an increase in prices and very few have seen a decline. This is a sign that there is stabilization and recovery in process. There is a good reason to believe that prices will start to increase slightly across the board by the end of 2012.
Appreciation is still a distant concept – being a buyers’ market and the mentality that everyone wants to submit a lowball offer on an already low price is going to slow down a value recovery.
Mortgage interest rates will remain at historic lows, however home ownership rates continue to fall, due to lack of jobs stability and mortgage qualifying guidelines.
This is leaving the door open to many foreign investments. USA is seen as #1 for real estate investments worldwide, both residential and commercial.
Distressed properties actually represent the majority of housing inventory – this still includes a strong trend with short sales (lenders are improving and streamlining their short sale process, mainly due to strong government involvement) and foreclosures (REO properties – shadow inventory – are going to be released in the market more than in 2011.) Just Bank of America has claimed a 60% increase in short sales in 2011 over the previous year and they expect 2012 to be at the same level or more.
Several lenders have started offering lease option sales. Homes that have been foreclosed are leased back to the homeowner through a lease option program and eventually are allowed to purchase the house back. This trend is going to become more popular in 2012, with so many REO properties sitting in “shadow inventory.”
Bulk REO Trading will be on the rise. With so many homes foreclosed, waiting to be released in the market (banks are controlling how many homes are released at one time, so not to flood the depressed market with distressed property prices and drive values down further,) banks are looking to sell these homes in packages to investors.
Home remodeling and improvements will be on the rise – owners prefer adding or remodeling their existing home instead of trading up or buying a new home. By now investors should be used to a different approach to investing: real estate has definitely evolved into a totally new way of doing business and the window of opportunity is still wide open. 2012 is reinforcing the new concepts and ideas that we have learned in the last few years: now it is a matter of thinking outside the box and capitalizing on the trends.