Real Estate Forecast for 2012

2012 is moving fast. The NBA season has finally begun, NFL playoffs are underway, and the Golden Globes have been awarded. So what about the real estate market? Where is it headed? What can investors expect as we move ahead?

The best guess: “the real estate market will continue to fluctuate,” (to paraphrase JP Morgan). But at the same time there are some key factors to consider as you shape your investment strategy for the year.

First of all, more than ever, the real estate story is a local story. While some areas of the country continue on a downward trend, the outlook for Northern Virginia continues to be positive. Recent surveys by both the National Association for Business Economics and Manpower Employment show expectations for “moderate economic growth through 2012 for the Washington, DC, Arlington and Alexandria, Virginia areas, with little likelihood of another recession or an outbreak of inflation.”


But just the way the US stock market is adversely affected by Europe’s trials and tribulations, so there are nationwide issues that can affect even our healthy local real estate market. So, it helps to understand the big picture and what to watch for.


Writing in the Wall Street Journal on January 5, Nick Timiraos listed five issues that he believes will help determine the fate of real estate prices in the coming year. In brief here are five key issues to watch:

* Confidence and jobs – will 2012 see a marked improvement in employment figures across the country?

The real estate market depends upon it.

* Foreclosures – how will banks and lenders deal with the 440,000 REO’s already on the books and the 3.4 million more properties in jeopardy of foreclosure?
* Rents – As the vacancy rate drops to its lowest in years, will rising rents cause people to buy?
* Mortgage credit and rates – will banks make it easier for people to obtain financing?
* Regulation – how will new rules that result from the Dodd-Frank Act affect lending practices?


Many of the answers to these questions may depend on unforeseen influences. Of course, the government is aware of the hugely negative impact that the housing market continues to have on the economy and even the Fed is now looking for ways to help. Next time we’ll look at whether or not these latest government proposals will be helpful, harmful, or just plain ineffective. Stay tuned.