Looking to 2012: What will be the real estate trends?

As Published in the News Press

By D. Michael Burke

Predicting trends during these market conditions is not easy. However, we’ve seems some positive signs that point to a successful real estate season in 2012. There are also many factors that indicate that now is the time to buy in Southwest Florida. Based on some of these factors, what can we predict for 2012 in our market? The point is that while no one can be 100% sure, not even the experts, we can still take what we now combined with historical facts and trends and make some predications that are definitely worth considering.

Based on 2011 history, here are five predications for your consideration:

1. Buyers will return to the Southwest Florida market. In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy. Add historically low mortgage rates and a strong desire to own versus renting, and you’ve got this prediction “in the bag” so to speak.

2. Housing Inventory will continue to decrease. The inventory of homes in Bonita Springs, Estero and Naples, Florida has continued to decrease consecutively since 2008. 2011 inventory showed a 23% decrease over 2010. The biggest declines showed within single-family homes in the price category of $250,000 and below. Those units dropped by 814 between 2011 and 2010. Homes priced between $500-700,000 are 117 units less than 2010.

3. Sale activity overall will increase in 2012. In 2011, all price ranges showed increases over 2010 and we’re looking for the same result in 2012. Sales rose consecutively each year since 2006 and in 2011, sales are just 740 units short of sales levels in 2005, prior to the downturn. Foreclosures and short sales decreased as a percentage in the overall market and remaining units in the category are priced below $250,000. Sales for units over $1,000,000 have increased consecutively since 2009, showing an 11% increase in 2011 over 2010.

4. Mortgage rates will remain a driving factor in homes sales. As we already know, the Federal Reserve has already maintained that rates will stay low until 2014. This has been a major factor in deciding to buy over the last year and will continue into 2012. Other interesting statistics from www.realestateinvestordaily.com include:

o Younger buyers and first-time buyers are leaving the market. 37% of home buyers were first-time buyers, a drop from 50% in 2010. A typical buyer is now 45 years old, a jump from 39 years old in 2010.

• To attract buyers, “41% of sellers offered incentives such as home warranty policies or financial assistance with closing costs. The typical home sold at 95% of the listing price and 61% reported they reduced the asking price at least once.
• Single women are also leaving the home buying market dropping to “the lowest market share since 2004″at 18%, while married couples purchasing homes have increased to 64%, “the highest share since 2001.
• Referrals from families or friends account for just 41% of an agent’s customer base. Once a buyer selects you as their agent, you’ll have a loyal client because “nearly nine in ten buyers would use their agent again or recommend to others.
• Financial aspects of homeownership are important, but they do not stand alone as the primary motivators for the purchase of a home. The top three factors that influence their home purchase are quality of the neighborhood, convenience to job, and overall affordability.

5. Foreign Buyers will continue to take advantage of Southwest Florida Prices. It’s no secret that foreigners have been purchasing second homes here in Florida and throughout the Southwest Florida as well.   How do foreign home buyers impact our market? According to recent reports, International buyers are expected to buy even more in 2012. Florida has been the front-runner in International sales since 2009.  Condos continue to be foreign buyers’ residence of choice with condominium sales accounting for more than 70 percent of purchases. International buyers are largely cash buyers and buy homes at a higher price point. Recent statistics show that 1 in 10 foreign home buyers purchase in the Southwest Florida area.  But, they aren’t the only buyers attracted to our sunshine state.   As a result, home prices have risen while inventory has fallen. Additionally, by now you’ve probably heard the term “buy a home, get a visa”.  Another possible boost in the International home buyers’ market is the foreign home buyer visa; just spend $500,000 in residential real estate and receive a visa to live in the U.S. 

Nationally speaking, we aren’t the only ones who think 2012 holds improvement for many markets in the U.S. There is a growing belief among many experts that 2012 will be the year housing turns the corner and starts heading in a more positive direction. Of course there will always be the naysayers who say we are too optimistic, so it makes sense to share the beliefs of other credible organizations on this point:

Washington Post: “Housing Market and Economy Showing Encouraging Signs.”

The Wall Street Journal: “From Bottom Up, Signs of Housing Recovery”

USA Today: “Housing Outlook is More Upbeat”

CoreLogic: “CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.”

Freddie Mac: “With the New Year comes a sense of cautious optimism. There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery.”

Fannie Mae: “The housing sector will likely take incremental steps forward in 2012 …according to economists at Fannie Mae.”

All in all, I think we’re in for an interesting and fruitful 2012 for the Southwest Florida Real Estate market. If you agree and need some assistance, be sure to find a Realtor that has an abundance of knowledge in our market and knows how to read the signs!