2011 Housing Forecast

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2011 Forecast

Now that the government incentives that stimulated the housing market, such as the first time buyer tax credit, have run their course, the market must operate on its own moving forward.  While we still anticipate 2011 to be a transition year, as 2010 has been, it will continue moving further toward stabilization.  We expect the annual sales and median price to increase two percent to 502,000 and $312,500, respectively.

Although foreclosures appear to be on the decline during the second half of 2010, they are expected to remain high in 2011 as foreclosure filings rise, employment statistics remain weak and the economy continues its struggle to emerge from the recession.  The November REO inventory of 112,000, according to Foreclosure Radar, translates approximately to an additional 2.4 months on the Unsold Inventory Index (UII); coupled with the 6.5 month MLS listings figure, the total UII would be about nine months. While this is above the 7 month long run average, it is well below peak levels that would trigger a significant decline in prices.  This inventory is unlikely to worsen in the long run, according to the trend that we’ve seen over the past year.  This means that overall, with notices of default decreasing while REOs are increasing, the market is showing continued signs of stabilization with respect to the “shadow inventory”.

There are some wildcards that will prevent the housing market from reaching a full recovery in the near term: the possibility of another recession, Federal economic policies, negative equity homeowners and shadow inventory.  Despite these uncertainties, there will be some tremendous opportunities in the housing market for first-time buyers, investors, long time owners and international buyers.  These opportunities will pave the way to recovery in 2012 and beyond.

Forecast provided by the California Association of Realtors

Category : Blog

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