Gaze into My Crystal Ball for Real Estate in 2011
By Bill Primavera
The Home Guru
Just last week I appeared before the town board of my hometown, which happens to be Yorktown, with a proposal for development of a property now owned by the town. A comment on the other side of the table was that the town might just wait until the market recovers before selling the property.
When I indicated that it might be a wait of three to four years before the market experienced anything that could be considered a turnaround, one board member looked at me in astonishment and asked me to repeat what I had just said.
Yes, it seems like an eternity, I admit, especially to people like me who are old enough to have experienced recessions in the housing market in the past, but not to the level of the Great Recession that we have endured in the past four years.
Somehow those of us who observe, write about or sell real estate have not gotten the message out clearly enough to everybody. Maybe it’s just of passing interest to those who plan to stay in their homes for the foreseeable future and those who feel confident that what goes down must come up again.
Maybe in these crazy times of housing, the best thing is not to look too far ahead. And the near future, according to the industry pundits, seems to have some common agreement and some widely divergent opinions. Let’s survey this past year and look into that crystal ball for the real estate market in 2011.
Most real estate analysts consider the low ebb of the market to be 2009, but 2010 was downright schizoid as home sales rebounded in September with a great boost from the federal tax credit from the months before. That encouraging month was to be followed by a scary October when we knew that the flurry of closings the month before was artificially stimulated. But the slight uptick in November and this month was encouraging as we anticipate the new year.
There are those who say a turnaround to the point of experiencing robust sales and rising home prices may still be a decade away. But, at the same time, many feel that the bleeding has been stemmed and that we can lick our wounds, faced with the reality that our homes may have fallen in value by 20 to 30 percent in this area.
On Bloomberg News, Nicholas Retsinas, Director of Harvard University’s Joint Center for Housing, predicted earlier last month that mortgage rates won’t increase appreciably in 2011, but once they do, it may happen quickly. That already has proved inaccurate in that mortgage rates already started to appreciate this month.
Freddie Mac predicted that mortgage rates would climb slightly in 2011 but would remain below 5 percent, but that has proved wrong already. Mortgage Bankers Association got it right by predicting that rates may exceed the 5 percent that Freddie Mac predicted.
While Warren Buffet predicted that the housing market woes would be behind us by 2011, he probably has spoken too soon if compared with other sources. For instance, Forbes has predicted, that home prices may fall another 20 percent in 2011 before there is a nationwide housing bottom. But, in our local market, we can probably better accept the prediction of Moody’s Mark Zandi who says that home prices may continue to decline but not so sharply. He predicts an 8 percent decline through the third quarter of 2011.
However, according to the National Association of Business Economics, it is believed that home prices have already reached bottom and will increase slightly in 2011.
The Wall Street Journal counters the last opinion in an article by Nick Timiraos, projecting that home prices have not yet reached their bottom but will do so in 2011, and that the housing market won’t start to recover until the following year.
But in our area, sales performance in the two categories of lower priced homes and more expensive homes of $1 million and over has improved significantly in the past few months. It’s all very location-based and price-based.
While different quarters may spout divergent opinions, all of them agree that the rebound in housing is based on unemployment which last month edged up to 9.8 percent.
If as a seller, buyer or realtor we’re confused about whether the crystal ball for 2011 is projecting positive or negative energy, we’re in good company when you consider that the behemoths of business and news can offer some opposite viewpoints on the state of housing.
For instance, Time Magazine’s September 6th front cover featured the headline: “Rethinking Homeownership,” with the subtitle, “Why owning a home may no longer make economic sense.”
But, the following week, The Wall Street Journal responded quickly with a piece by Brett Arends called “10 Reasons to Buy a Home.” For those who want to think more positively about the benefits of owning a home today, I list the reasons here:
1) You can get a good deal in this buyer’s market; 2) Mortgages are still cheap; 3) You can deduct the mortgage interest from your income taxes; 4) It’s “yours” to do with it what you want; 5) You’ll get a better home than you can with a rental; 6) It offers some inflation protection; 7) It’s risk capital that links part of your portfolio to the long-term growth of the economy; 8) It’s forced savings; 9) There is a lot to choose from right now; and, 10) Sooner or later the market will get better until demand meets supply.
So gazing into that crystal ball for 2011 on your own, does it look like worsening clouds ahead, or do you see the silver lining? I predict the latter. But, I’ll weigh in at the end of next December.
Bill Primavera is a licensed Realtor® (PrimaveraHomes.com), affiliated with Coldwell Banker, and a marketing practitioner (PrimaveraPR.com). Anyone considering selling or buying a home can reach him directly at 914-522-2076.