Mid 2011 Housing Market

Mid 2011 Housing Market

The mid 2011 housing market appears to be positive for its outlook for the future.  Buyers that helped create the 2005-2007 real estate “bubble” have been liquidating their real estate investments that are upside down, through short sales, outright foreclosures or DIL (Deed In Lieu) processes.

Buyers have been taking advantage of these “fire sales;”  purchasing existing homes and properties at distressed (lower than natural, marketplace) prices.  Warren Buffett already forecast the obvious: when these lower-than-normal priced properties are eventually absorbed by bargain-hunters, the market will return to some measure of equilibrium, meaning: prices for new homes and land will begin to rise.

While previous boom era (2005-2007) loans were written with relaxed borrower requirements, today’s loan standards are more stringent.  Today’s stiffer standards may in fact be too strict, making it difficult for many people to obtain loans.  Our economy does appear to be improving, however.  Consumer debt will hopefully be reduced.  Lending institutions should have an increase in their required reserve funds, meaning that hopefully lending requirements will be loosed somewhat.  This should allow more people to qualify for loans to build new housing.

Pricing for real estate through 2011 may be a horizontal line, if posted as a graph on a chart; neither going up nor down.  However, as Mr. Buffett has foretold, as the current distressed properties are sold, demand for new homes will have to increase at some point.  By 2012, we may see some resurgence of what should be a more steady return to Demand and Supply (rather than supply then hoping for demand), which means that by mid-2012 normal appreciation may begin to accrue again.  Owner occupation of the new homes is likely to enhance the stability of the marketplace as it recovers, rather than buyers treating new housing strictly as an investment vehicle.

So what can we take from this?  It takes about 6 months to a year or so to acquire new land, have a new house designed, bid, and begin construction.  That is about the present time frame left to accomplish these tasks before prices (and stability) begin to rise.  Moral of the story: if you are planning to have a new house designed and built, you may want to consider engaging your house architect now.

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