The University of San Diego hosted the 12th annual residential real estate conference in December. Seasoned economists and local real estate experts prognosticated to a packed house giving their best estimates of what to expect in 2012.
Douglas Duncan, a chief economist for Fannie Mae who the Wall Street Journal named as one of the top four most accurate economists in 2010, outlined reasons why the real estate market is only in the fifth year of a 10 year adjustment process.
Though the current market is often characterized as 'the new normal' by major media, Duncan is quick to counter that it is merely reverting to historical standards. The current lower number of home sales and lower prices in real estate is the market balancing itself after a credit boom, Duncan said.
He outlined a few of the major challenges facing the national market.
Duncan cited household debt levels (20 percent of households owe more than their home is worth), the inability for many to refinance adjustable or high rate mortgages and the eventual reformation of the mortgage market back to a private market (higher interest rates) as key reasons why a national recovery in real estate will not happen in the short term.
Duncan outlined an interesting shift in attitudes towards renting versus buying. Renting a home is now seen in a more positive light. With housing prices down and mortgage rates expected to stay low, many are putting off buying a home and choosing to rent. For some, renting has also become a necessary option. New college graduates are carrying record loads of school debt that puts them years away from buying their first home. And for those with a recent bankruptcy, short-sale or foreclosure on record, renting a home is the necessary option. But again, Duncan states that the current rental levels are reverting back to historical normalcy.
Making sure to cover all bases and true to form for economists, Duncan forecasts that select local markets could see a sharp rise in home prices in the short term. The United States is currently experiencing the lowest new construction starts since World War II. Additional new homes have not been needed as excess the supply of foreclosure and short-sale homes have been able to meet demand. But that could change in select markets sooner than expected. Duncan forecasts that these markets could see rapid price appreciation as new construction lags demand.
Duncan's prediction for the 2012 real estate market includes flat housing prices with an increased number of home sales nationally. But, Duncan reminded the audience that "all real estate is local," and added that local markets can deviate depending on local dynamics.
In a more local view, Carlsbad is expected to see continued flat pricing through 2012, a trend that is a carryover from 2011. The fourth quarter 2011 winter market in Carlsbad saw about 30 percent fewer sales. However average prices stayed relatively constant at $624,000 for properties under $1 million, which represents a majority of the area's homes.
Carlsbad's real estate market is expected to remain a buyers market through 2012. There is enough current inventory to satiate demand and distressed property (foreclosure and short-sale) should keep comparative sales from rising. It is interesting to note the local dynamics that coincide with Douglas Duncan's prognosis.
Property managers and owners will attest to the strength of the current rental market. Multiple applicants for every rental and increased rental rates are now common. With current low mortgage rates, real estate investors are finding their return on investment staggering. Also, select Carlsbad neighborhoods have little to no homes available for-sale. And although not the norm, should more neighborhoods see fewer homes, Carlsbad will be Duncan's local market that will experience higher pricing.
Reach Lund at [email protected]
Douglas Duncan, a chief economist for Fannie Mae who the Wall Street Journal named as one of the top four most accurate economists in 2010, outlined reasons why the real estate market is only in the fifth year of a 10 year adjustment process.
Though the current market is often characterized as 'the new normal' by major media, Duncan is quick to counter that it is merely reverting to historical standards. The current lower number of home sales and lower prices in real estate is the market balancing itself after a credit boom, Duncan said.
He outlined a few of the major challenges facing the national market.
Duncan cited household debt levels (20 percent of households owe more than their home is worth), the inability for many to refinance adjustable or high rate mortgages and the eventual reformation of the mortgage market back to a private market (higher interest rates) as key reasons why a national recovery in real estate will not happen in the short term.
Duncan outlined an interesting shift in attitudes towards renting versus buying. Renting a home is now seen in a more positive light. With housing prices down and mortgage rates expected to stay low, many are putting off buying a home and choosing to rent. For some, renting has also become a necessary option. New college graduates are carrying record loads of school debt that puts them years away from buying their first home. And for those with a recent bankruptcy, short-sale or foreclosure on record, renting a home is the necessary option. But again, Duncan states that the current rental levels are reverting back to historical normalcy.
Making sure to cover all bases and true to form for economists, Duncan forecasts that select local markets could see a sharp rise in home prices in the short term. The United States is currently experiencing the lowest new construction starts since World War II. Additional new homes have not been needed as excess the supply of foreclosure and short-sale homes have been able to meet demand. But that could change in select markets sooner than expected. Duncan forecasts that these markets could see rapid price appreciation as new construction lags demand.
Duncan's prediction for the 2012 real estate market includes flat housing prices with an increased number of home sales nationally. But, Duncan reminded the audience that "all real estate is local," and added that local markets can deviate depending on local dynamics.
In a more local view, Carlsbad is expected to see continued flat pricing through 2012, a trend that is a carryover from 2011. The fourth quarter 2011 winter market in Carlsbad saw about 30 percent fewer sales. However average prices stayed relatively constant at $624,000 for properties under $1 million, which represents a majority of the area's homes.
Carlsbad's real estate market is expected to remain a buyers market through 2012. There is enough current inventory to satiate demand and distressed property (foreclosure and short-sale) should keep comparative sales from rising. It is interesting to note the local dynamics that coincide with Douglas Duncan's prognosis.
Property managers and owners will attest to the strength of the current rental market. Multiple applicants for every rental and increased rental rates are now common. With current low mortgage rates, real estate investors are finding their return on investment staggering. Also, select Carlsbad neighborhoods have little to no homes available for-sale. And although not the norm, should more neighborhoods see fewer homes, Carlsbad will be Duncan's local market that will experience higher pricing.
Reach Lund at [email protected]