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Housing Market Vision for 2012 & 2013

Posted Saturday, January 21, 2012

It's a buyer's market for real estate, to say the least. That's okay, because I know that real estate is a long-term investment. I hold on to what I have when the market isn't right. After all, the reason I own a home is so that I don't get stuck out in the rain. I bring that lesson to my financial life, and let the slow and steady nature of real estate investment carry me through these tough times. It will be time to sell when it is "sunny" again.

Home prices have fallen since 2008. That slide will grind to a halt this year, leading to a slow but steady upswing. A recent Reuters poll of economists and analysts has found broad consensus that the turnaround will begin in 2013. They now predict no change in the S&P/Case-Shiller home-price index for 2012, which marks an end to the decay in prices that we've felt since 2008.

A housing market recovery is a necessary first step to an American recovery. The unbelievable disaster that befell our housing market, which cut average prices by more than a third, caused an international financial crisis and recession. After some hard years, the market has reached equilibrium. Unfortunately, it's equilibrium at a lower level than before. The market is expected to gain only about 1.5% in 2013, which may not seem like much when a third of your equity has evaporated in the last five years. It's especially difficult when you are "underwater" on a mortgage. 2013 can seem far away when you owe more than your home is worth. However, there is a certain strength, and clarity, to the moment. The market has found its support level, and housing prices can be reasonably expected to remain above this from now on. We can only grow up from here. The current housing market has a seed of stability that will be able to sprout and grow from now on.

If I sell my house today I earn, on average, the same I would have if I had sold nine years ago. That's nine years of progress that wiped out in the real estate market, and prices are still falling in some places. Overbuilding filled some towns with houses that can never be filled with people. In cities like Detroit, entrepreneurs are actually turning housing back into farmland. Foreclosed homes are transformed into rental properties nationwide. The hard times are ending, but they have not ended yet. So, though I want to sell my house, now is time to wait.

So the conclusion is, Home prices will stay steady in 2012 and rise in 2013.