As we close the books on 2011, we can say it was better year than 2010 for activity in real estate. Prices continued to drift lower for us, primarily brought down by distressed sales. For sales – the outlook isn’t so bright – but all those people are looking for rentals – some may have not so great credit but will prove to be great tenants. Let’s get right to the nuts and bolts of why I believe 2012 is going to be remembered as a great year to buy real estate.
Top 10 reasons why you should be optimistic about the real estate market in 2012.
- 1.According to Case Shiller in 2012, 372 of the 384 real estate markets they track are projected to have housing prices appreciate, while only 12 markets are expected to see prices decline. Atlanta is one of the 12 expected to decline!
- 2.In markets that have had the largest price drops, those markets now have the most significant increases in affordability. For us Northwest Atlanta the ratio of mortgagepayment to family income has dropped from its height of 59% in 2007 to 19% today. That means people are paying 1/3 of what they did just four years ago to own their homes. This is becuase of the lower interest rates and lower prices.
- 3.Apartment move outs to buy homes are escalating. Currently, measured at a six-quarter high of 13.5% by Zelman and Associates. That means that 13 out of every 100 renters moving out of apartments are doing so to buy a new home.
- 4.Low prices combined with historically low interest rates make 2012 a once-in-a-generation opportunity to buy real estate and build wealth. Look for this trend to continue only through 2012 and 2013.
- 5.Wall Street wants in! That’s right. Hedge fund managers are trying to figure out how to capitalize on the opportunities in the single family home market. There is some irony here. Wall Street is trying to occupy us. You should know that they are going to do it, charge some fees, and then ask your fund manager to buy in with your money. Why not cut out at least two middlemen?
- 6.This month’s headline from Credit Suisse monthly survey of real estate agents is a telling sign of things to come. “Affordability Slowly Pulls Wary Buyers back!”
- 7.2012 is when CNBC’s Jim Kramer originally forecasted the housing crisis to end. I know he has revised this but the two things you need to remember are that Wall Street generally worries more about new home starts and builder stocks then the existing housing market. Then just remember what your old SAT test prep instructor preached, “Always stick with your first answer!”
- 8.According to local mortgage guru Daryl Edquist at Fairfield Mortgage, “Rates look to continue to decline as the fed works to reduce rate in the commercial backed securities(CMBS) market as part of QE3.” Can rates drop below 4%? It’s possible. While I’m not qualified to say there is a bubble that is going to burst, it sure looks like irrational behavior is driving long-term rates that low. That’s behavior that real estate buyers should capitalize on with long-term fixed rates.
- 9.Job Growth looks strong as retailers and small business entrepreneurs now lean from the recession look to take on new locations and bring new jobs into our communities.
- 10.Our rentals are not staying vacant and are actually able to get small increases in rental rates!