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Looking into 2012
As the New Year begins, I’ve already been in touch with many clients and friends wondering about what 2012 has in store for the real estate market. “Are prices going to continue to fall?” “Is this a good time to buy?” “If I sell my home this year, won’t I be taking a big loss?” “Is the market going to get flooded with an onslaught of bank-owned homes, driving prices down even further?” “Are we at the bottom of the market?” If I only had my crystal ball!
But here is what I do know…
Economy: Our present real estate market is tied tightly to the health of our employment figures. Our economy has been in a downturn, besieged with bad numbers for multiple years. However, over the past six months, we are seeing improvement in some of these figures, most importantly, unemployment has shrunk to 8.5% after being stuck at or above 9% for most of the past three years.
Inventory/Prices: Due to increased buyer activity, we have seen a dramatic shift in inventory for the Tri-County area of Portland. In November 2010 we had 9 months inventory. In November 2011 inventory fell to 5.3 months. Average sold price fell from $293,000 to $282,000 for that same period, a four percent correction. However, over the past three months prices have remained stable, averaging $281,000-$283,000. This is a possible sign that we have hit a threshold.
Selling: It is often difficult for home owners to think about selling in this current market. Prices have dropped 29 percent in the Tri-County area since the peak of July, 2007. For someone asking me if this is a good time to sell, my answer may be “No, you may want to wait.” However, for many, selling in this down market may make great sense if they are going to be buying a home on the other end. Remember, homes will rise and fall together, but more importantly, interest rates right now are at historic lows. No one knows how long they will be here, but by all accounts, if economic news continues to improve, interest rates are projected to rise.
Interest rates: Even two years ago, who would have ever thought we would see mortgage rates in the high 3’s to low 4’s. For those of us who do not see moving in the foreseeable future, refinancing may make tremendous sense, if you have not taken advantage of this opportunity already. Contrary to common belief, depending on the type of loan you have, you do not necessarily need equity in your home to refinance.
Buying: With historic low rates, first time buyers, second home buyers, and investors are entering the market, realizing this is an incredible opportunity. This is one reason why we have seen inventory levels decrease over the past year. It may still be considered a “buyer’s market,” but it is not uncommon for desirable homes, priced competitively, to be met with multiple offers.
When will we see the bottom of the market, and when will interest rates begin to rise???? Unfortunately, we will only know when we are looking at it in the rearview mirror.
