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2012 looks better for real estate

Experts see a bottom this year, followed by a gentle upsurge in home prices.

By MSN Money Partner Jan 3, 2012 10:29AM

This post comes from Marilyn Lewis at MSN Money.

 

One fun part of ringing in the new year is placing bets on what it will bring. Collecting New Year predictions isn't as silly as it sounds; it gives knowledgeable players a chance to share what they know.

For those of us trying to gauge whether to sell, buy or rent in 2012, every scrap of wisdom helps. Here are predictions from a few trusted voices in real estate: Post continues below.

Karl Case

Case, an economist and professor emeritus at Wellesley College, is one of the nation's smartest observers of the real-estate market. The S&P/Case-Shiller Index, invented by Karl Case and Robert Shiller, "is pretty much the Dow Jones industrial average of real estate," says The New York Times.

 

"The 20-city composite index of home prices hit bottom in March 2011 and has improved modestly since," writes the Times in a year-end look at the economy.

 

Judging from the index that bears his name, the future holds nothing but more grimness for real-estate values in the U.S. "Nasty Case-Shiller shows home prices barely off their crisis lows" is how Forbes put it last week.

 

"But Mr. Case points out that the data masks some signs of eventual recovery," says the Times. Here's Case's assessment:

"Household formation is increasing and the vacancy rate is dropping," he said. "Housing starts are at a 60-year low, and they've been there for three years. That's unheard-of. We're starting to see some signs of an increase in value."

Diana Olick

CNBC's real-estate reporter is no economist. Olick's academic preparation consists of a BA in comparative literature and a minor in Soviet studies. But she's smart, her "Realty Check" blog keeps a sharp eye on real estate and she talks with the best analysts in the business.

 

Among her predictions:

  • Home prices finally hit bottom by late 2012 but not before dropping 5% more.
  • Plenty more homeowners will default on their mortgages, keeping a huge backlog of foreclosures looming over the market. (Of course a monkey with a Magic 8 Ball could have predicted this.)
  • Rents rise as demand for rentals grows.
  • Government makes no dramatic efforts to solve the housing mess.

Bloomberg

"Even the worst-hit markets will begin to see improvement by 2012," write Bloomberg real-estate reporters Prashant Gopal and Diana Holden. They, too, say prices will drop more before a turnaround begins.

 

Bloomberg makes predictions for home values in metro areas and each of the 50 states, including median home values predicted for 2012 and those in 2008, when the bust began, plus the percent of change expected.

 

Three examples:

Arizona
Metro: Phoenix-Mesa-Scottsdale
What a Home Will Be Worth in 2012: $141,859
Q4 2008 price: $169,000
Projected price change by MSA: -16.1%
Projected price change by state: -17.2%
Michigan
Metro: Warren-Troy-Farmington Hills
What a Home Will Be Worth in 2012: $157,469
Q4 2008 price: $149,000
Projected price change by MSA: +5.7%
Projected price change by state: +2.0%
New York
Metro: New York-White Plains-Wayne (N.Y.-N.J.)
What a Home Will Be Worth in 2012: $343,937
Q4 2008 price: $440,000
Projected price change by MSA: -21.8%
Projected price change by state: -15.6%

Kiplinger

The summary beneath the headline sums up Kiplinger's outlook: "The bleeding is just about over. But don't expect a speedy recovery."

 

Writes the magazine:

The median home price in the U.S. has plunged nearly 40% in a little over five years, but the worst is definitely over: The market has finally wrung out the last excess valuations born of the housing bubble.

Assuming no further shocks to the economy (no safe assumption, given the fragility of the world economy) U.S. real estate will slowly work its way out of the red, Kiplinger predicts.

 

Among experts interviewed, Mark Zandi, chief economist at Moody's, says prices will drop no more than 3% to 5% in 2012, "setting the stage for gains in 2013."

 

FoxBusiness

FoxBusiness interviewed John Lonski, chief economist at Moody's Capital Markets Group, who sounds bullish on housing:

"Financially strong households that have spent money at Tiffany's and on cars are afraid of putting money in housing as they don't want to arrive too early," says Lonski.  "But we could be surprised at how vigorously the ensuing upturn of home sales becomes."

Tara-Nicholle Nelson

Inman News columnist Tara-Nicholle Nelson is an attorney and a real-estate agent, giving her a boots-on-the-ground perspective. She predicts:

  • Prices will recover faster in cities with thriving high-tech industries. Among them: Silicon Valley and the San Francisco Bay Area; Austin, Texas; Massachusetts suburbs of Cambridge, Newton and Framingham; Rochester, N.Y.
  • "REOs and short sales will become the new normal" as banks continue to foreclose and dispose of the backlog of homes on their hands. "Buyers will shift from considering whether to buy a short sale to understanding that they must be educated and prepared to do a deal with a seller, a bank (to buy an REO) or a hybrid of the two (to buy a short sale) to access the full selection of homes on the market."

More on MSN Money:

9Comments
Jan 3, 2012 3:52PM
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I love these experts?? Sitting in their nice little office making careless statements. I am a Realtor and a Mortgage Broker and I can tell you that real estate all depends on location, location, location. If you live in a town where there is high unemployment then the real estate market will continue to decline......no job.....no money.....no mortgage....simple as that. No builder is going to start a project in Detriot.....Phoenix......most of Florida.....Vegas.....they will build in an area where people have jobs.

So you "experts" should really rent a home in one of these areas for a month and then re-write your article.

Jan 3, 2012 3:30PM
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Case states he is seeing signs of increasing value in certain cities.   Diana Olick predicts another 5% drop in value through 2012.  Listen to the real estate analyst forget the person looking at stats in a university college environment.   They are out of touch with what really happening in the market.  In the real estate industry twenty five years every day in neighborhoods New York City and surrounding counties.   Nothing is happening period.  A lot of hype and spin these articles.  Until you see housing starts of one family homes rise nothing going to happen that has any real impact on the economy.
Jan 3, 2012 4:05PM
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I wonder if this is the same set of clowns that just recently said 2012 would bring higher car sales?
Jan 3, 2012 4:06PM
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Well Senator Dudd, if they can't afford to put 5% down, how will they be able to make regular payments?  Oh, wait..I forgot..  the U.S. taxpayer will be taking care of that detail.  Liberal maggots. ...just can't think past spending other people's money.  Vote the filth out in 2012 and any Republican who acts and votes like the liberal defecation currently shafting the U.S. citizens.Confused
Jan 3, 2012 4:38PM
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All you investors need to come to Vegas, our prices are down.  Paid 100K, 15 years ago, now selling for 72K, during the housing boom sold for 235K.  Investors only, because there are no jobs here!
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Ahhhhhh. the denial still goes on. At least Suzie Orman was hones in recomending on CNN that people should walk away from their homes.

Moodys? The same rating company that rated all these toxic loans as AAA investments and turned out they were DUDS? The same company that helped Goldman Sachs, Leyman Bros, AIG, and ALL THESE BANKS sell these bad loans to investors with their fraudulent valuations? Those same Foxes that created this whole mess are still guarding the hens pen. I have not seen any of them in jail yet. Banks are foreclosing homes even when evidence are emerging to suggest that they don't have the leagal right to do so yet they do it.  Landmark court rulings in bankruptcy courts in Massechussetts, Florida, California, Nevada have proven that banks do not have standing to foreclose and they need to prove they own the Note. So far they have not. FHFA, FANNIE and FREDDIE had sued all these banks for these fraudulent loans and banks are settling out of court rather than litigating it in court and the reason is precisely that they did not want to be forced by the courts to provide evidence in court to prove their ownership or rather NON- OWNERSHIP of the loans. Anyone with a half brain can tell you that they don't own the notes particularly after they sold all these loans to investors in pools. They TURE OWNERS of the Notes are the INVESTORS. There is a WHOLE LOT OF FRAUD that the public should know about but mainstream media does cover any of these. Everyone is trying to sweep all these under the rug and hope it will sort itself out. Well, I DON'T BELIEVE THAT this will sort itself out. Their will be mountains of lawsuits from homeowners against these illegal foreclosures and that will not help the recovery they are talking about here. In addition, the income level needs increase and that will only happen with job availability and stability. Companies are still cutting jobs than they are retaining.

HOMEOWNERS SHOULD FIGHT BACK. IT IS NOT" JUST" THAT BANKS WHO CREATED THIS MESS CAN BE BAILED OUT BUT HOMEOWNERS CAN'T. WHY SHOULD WE PAY FOR THEIR FRAUD.  

            

             

Jan 3, 2012 4:47PM
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real estate agents like yourselves are parasites
Jan 3, 2012 4:54PM
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Actually year over year the car market has seen an very sizable increase in the past three years since carmagedden .  All you have to do is look at the data on a number of car related web sites( Edmounds is a good one ).  The housing market though is still doing much worse and I don't see it getting better for about five to seven more years.  The reason being that if you look at the data (on this site and others) it usually takes about ten years to overcome a housing slump totally. I am hoping and praying that it recovers faster (and it can) I just don't have much faith that it it. 
Jan 3, 2012 6:25PM
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Yes, I agree with another post that denial is going on in this article.  I live in the State of Oregon, and our Foreclosures are the highest they have ever been.  As long as we have a huge list of Foreclosures to buy from, who in the hell would buy anything else?   In our State, we have Doctors and Lawyers with perfect credit walking away from mortgages. Frankly, I think that is soooooo wrong!  If you still have a job, you should be forced to keep your mortgage. So you bought high... So what!  Foreclosure should be reserved for people who have no choice.  The author of this article is very high! 
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