I love Halloween for one simple reason, I get to make lots of people (mostly kids) smile. I love handing out big handfuls of candies to every trick-or-treator. I always buy way too much candy with the sole idea of getting kids to say “Wow!” or “Did you see how much he gave me”?
This got me thinking about Real Estate Investing and what 2012 might bring us. Will 2012 be trick (More Pain) or treat (Lots of Candy) for real estate investors?
As with most things in life, it will depend on your attitude and how you choose to tackle the opportunities/challenges that 2012 will offer.
I this post I have chosen the three most common topics discussed about Real Estate Investing. We will discuss Price, Finance and Foreclosure.
Prices in 2012
The best news I can offer about 2012 is that I believe the foundation of real estate prices will become firmer. Not rock solid, but the will certainly become firmer than the quicksand we are currently in. Specifically, prices in the lower tier and mid market will stabilize and stop the negative trend. Unfortunately, the high-end and move up markets still have some significant pain to be felt throughout 2012.
If I am correct in my prediction it means that inventory at the lower end of the market will continue to become solid rental homes as cheap properties are turned into performing assets. Stable prices and increasing transition volumes will drive 2012 to become the bottom of this real estate cycle. We won’t be off to the races but we will have caused an inflection point and prices will slowly start to mend over time.
Lending in 2012
The good news is lending has to get easier next year, because it simply can’t get any harder (can it?). When lending loosens up more buyers will qualify to purchase real estate. Increasing the number of closed transactions will mean prices will start to rise and the asset quality of banks will improve. As the asset quality of banks starts to improve we will have officially turned the corner as banks will increase lending on real estate. As this occurs we will witness the first of many positive feedback loops as good news causes more good news.
Lastly, I believe we will see the peak in foreclosures (Finally). The backup caused by the robo-signing scandal has to break free soon. When this does, we will see the spike in foreclosures and we can start the long road to recovery.
When foreclosures peak we will finally start to see some positive year-on-year metrics for sales, prices, and equity positions. When year-on-year metrics turn positive for real estate, attitudes will change. Newspapers, Magazines and the talking-heads on TV will start discussing the positive trends in real estate and this will cause real estate values to rise.
When the press starts to push real estate it will be too late to jump into the market. In fact when magazines start printing headlines and providing cover stories about the new found wealth in real estate it might be time to sell.
So if you’re a strategic buyer in 2012, real estate investing should prove to be a “Treat”. However, if you are a seller, I am afraid real estate will still be a “Trick” as 2012 will be a great buyers market. Don’t give up hope sellers as 2013 could be your year ….