The Goodhart Report - Market Outlook 2011

The Goodhart Report

Market Outlook for 2011 - A Matter of Perspective   "Call it befuddling and confusing...continuing low interest rates...the threat of what might be part of the overhaul of the federal tax system and the deductions for interest payments on the principal residence..." These comments certainly apply to our market today - but they were culled from the opening two paragraphs of a "State of the Real Estate Market" article in The Gazette Newspaper on October 16, 1986. But in 1986, the "low interest rates" referenced were hovering at 10%. It really is a matter of perspective. We expect 2011 to look a lot like 2010 in terms of the overall numbers of sales. There remains modest downward pressure on home prices in some areas but generally, the Washington, DC metro area is in one of the most enviable positions in the country. Predicting the spring market compared to 2010 is challenging. However, with no homebuyers' tax credit this year to spur action, it is reasonable to expect that this spring will be slower than last year. On the flip side, we expect a stronger summer and fall this year. Be prepared for some negative national housing reports if they are comparing month-over-year. The sky isn't falling - there's just a different horizon. Remember that real estate "markets" are LOCAL - the national reports don't mean much and our local reports are looking more positive than they have in the past several years. If one defines "recovery" as at least modest price appreciation and a relative balance in supply and demand, we expect the overall market to move toward recovery by the end of this year. Some areas are already there, but it's going to take a little while longer for things to improve significantly across the board.   So why do we feel this way? On the downside, people don't buy homes when they are uncertain about their own individual circumstances, and until the national economic forecast is more heartening, many potential homebuyers will remain cautious. With the possibility of still-lower home prices in some areas, even serious buyers are trying to calculate which is more likely - a further drop in home prices or a rise in mortgage interest rates. On the plus side, we have the best regional economy and the lowest unemployment rates in the country. Every jurisdiction in our area has an unemployment rate under 5%. Interest rates are low and are likely to stay at, or under, 5% for the next several months. From a historical perspective - witness the "attractive" 10% rates of 1986 - this is almost like giving money away to those qualified to buy. Combined with lower housing costs over the past several years, this makes homes more affordable than any time in the last decade. And, we haven't been affected by foreclosures here as many other areas have been. The problem isn't resolved - it just isn't likely to be as tough here as most other places. And despite all the roller coaster news on housing these days, many sellers are successfully selling properties and many buyers are finding attractive opportunities to own a home, taking advantage of today's buying power. Additionally, we are encouraged by the strong increase in activity in our area during the first few weeks of the year (both in terms of contracts and in sellers wanting to put their homes on the market), suggesting that a recovery here may be well on its way.   View the complete MarketWatch on My Website Today!