Friday, June 1, 2012

What will your home be worth in 2012?

When BusinessWeek set out to determine what housing prices would be in the year 2012, they knew that there was no way to know for sure. But in working with the Brookfield, Wis.-based research firm Fiserv, they weighed historical data against current trends to get a bead on which way the markets might jump at one-year increments. By combining data, they were able to get a pretty good idea of what home prices would be in three years' time. Across the board, real-estate prices will continue to drop before rising slightly by the fourth quarter of 2011. Why is that important? Given the wretched state of the real-estate market today, both homeowners and potential buyers might be better able to make an informed decision about when, and whether, they should move. Obviously, we can't guarantee that our data will hold up — although we think it will — but what becomes clear is that even the worst-hit markets will begin to see improvement by 2012.
Americans have not seen a boring housing market since the last millennium. You know—the average, ordinary kind of market where supply just about matches demand, prices are steady, and real estate ceases to be a topic of daily conversation. Instead, we've had six years of upside craziness followed by three years of downside terror. Now we're in a tug-of-war between those who think we've finally found a bottom and those who are convinced that the overhang of unsold homes is going to push prices considerably lower.
By 2012 we may finally get back to blissful boredom. With any luck, three years should be long enough for the U.S. economy to recover and for the nation's housing inventory to shrink to more normal levels. At that point, housing will return to its old ways, with prices governed not by national mood swings and global credit crises but by local issues ranging from zoning to immigration to job growth.
Prices? While they're likely to keep falling a while longer under the weight of foreclosures, the market is definitely closer to the bottom than the top. Expect prices to drop for another year and then stabilize before starting to rise with incomes about 16% this year before regaining ground. Based on the National Association of Realtors national median home price of $180,000 for the fourth quarter of 2008, that would mean a median of $152,000 at the end of 2009 and then a rebound to $179,000 by the end of 2012.

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