2010 Real Estate Review-Why 2011 will be more of the same!
Report from Neil Weichel
For 15 years we've started the New Year with a review of the past year in Real Estate and offered some suggestions on what we might see in the year(s) ahead. Reviewing a year like 2010 may be harder than any year before. The first half of the year had unexpectedly strong buyer demand (fueled by government incentives) and the second half was much slower than expected as the stimulus ended and inventory rose every month from June on. We would describe 2010 as "confusing." As I have suggested before, I have never read so many news reports on Housing that why housing in many areas is "undervalued." Could that include the San Fernando Valley? Yet, in the very next article I would read that there are over 7 million homes in some state of foreclosure which will keep values down until 2020. 2020? That wold be the longest slide in home prices in history! It is true that there are more homes with no equity than ever before, but how many of them will actually be foreclosed on? No one knows. And if this is what will keep values down for so long, why is the foreclosure inventory still only about 10% in the Valley? Confusing. In your neighborhood, you probably noticed a sale that suggested prices were stabilizing, and then see a short sale that was $50,000-$100,000 below everything else in the tract. Confusing. What is not confusing though is the clear fact that until distress sales become a much smaller part of what i available, prices will have no upward pressure. That is why for 2011 I would expect that we will have a market that is a lot like 2010-over 60% of the homes closing escrow will be either a short sale or foreclosure and that is what will keep prices from rising. However before jumping into more details to explaining why this year will likely be a lot like last year, let's acknowledge the fact that never before has the Government been more involved in the business of Real Estate, and what Washington does can have a big impact on inventory and prices.