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Real Estate Opportunities in 2012

Written by Gary North on December 26, 2011

Will real estate bottom in 2012? Probably not. Look at what happened in 2011. Prices fell. The market lost about $700 billion. But that was better than 2010, when it lost $1.1 trillion.

Of 128 markets, nine showed increases. New Orleans was the biggest winner: up $3.5 billion. Pittsburgh was #2, with a gain of $2.7 billion.

Who were the biggest losers? Big cities with lots of housing, like Los Angeles, down $75.5 billion, New York ($44.8 billion), and Chicago ($41.7 billion). Overall, more than 90% of markets lost value.

“While homeowners suffered through another year of steep losses, the good news is that homes are losing value at a substantially slower pace as the market works its way towards the bottom,” noted Zillow Chief Economist Stan Humphries in the report. “Compared to last year when we saw sharp declines following the expiration of the homebuyer tax credits, this year we saw some organic improvement in home values, in terms of a slowed depreciation rate which resulted in a smaller total value loss for the year.”

The key will be the job market. Unemployment is still above 8%.

There are pessimists out there.

What’s the real estate market outlook for 2012? Depends on who you ask. According to Zillow’s Humphries, “when we look ahead to next year, the unabsorbed pool of housing supply, dragging levels of consumer confidence, high unemployment and negative equity will continue to put downward pressure on the housing market, pushing our expectation for a potential recovery into late 2012 or early 2013.”

There is always the happy-face forecaster — not right in years — Lawrence Yun.

Lawrence Yun, chief economist with the National Association of Realtors, takes a similarly rosy view. “With housing inventory down significantly in 2011, home prices could easily turn up in 2012,” he says. “If a very modest 3 to 5% price gain, then housing valuation would rise by $500 to $900 billion.”

Should you buy as an investor? If you get a deal, yes. There will be deals. But maybe not as many as there were this year.

For home buyers, that may mean fewer rock-bottom deals next year–at least not from potential sellers still occupying their homes, Gumbinger says. “The lower-priced deals, if they come, will probably show in the form of additional foreclosed inventory hitting the market as we move past the ‘robo-signing’ and foreclosure-moratorium mess of 2011.”

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