Market Trends

While 2011 will be another challenging year for the housing market, many real estate experts are hopeful about the future and taking action toward recovery. A market comeback is contingent on a solution to the foreclosure issue, which is suppressing home prices and consumer confidence. For that reason, real estate professionals need to educate themselves about buying and selling distressed properties, handling short sales and working with investors, says Margaret Kelly, chief executive officer of RE/MAX and a panelist at the State of the Real Estate Industry forum held during the 2010 Realtors Conference and Expo.

According to Kelly, today's market shouldn't be called "the new normal" because the old market was abnormal. Despite the challenges of the current market, there are also plenty of opportunities, Kelly says, including low mortgage rates, stable prices and a plentiful inventory of homes for sale.
The attitude of current homebuyers has come a long way since the housing boom. In the past, many homeowners thought of their houses as "credit cards" to borrow money against -- a mindset that caused many of the financial problems we see today. While most Americans still think buying a home is a smart financial move, they also realize that a house is more than an investment. Instead, today's buyers are looking for a home -- a place to provide shelter and security for a family. As a result, homeowners are planning on stay in their dwellings longer; first-time homebuyers want to own their homes for a decade, while repeat buyers want to own theirs for 15 years.

Although home prices have stabilized considerably since the recession officially ended in mid-2009, we haven't reached the bottom just yet. According to a report published by Standard & Poor's, home prices will fall an additional 7 to 10 percent throughout 2011. This drop in prices is largely due to the high number of foreclosures expected to hit the market next year. If you plan to sell a home in 2011, pricing competitively will still be a crucial step to making a quick sale.

Foreclosure processing was delayed this fall by the "robo-signing scandal" -- in which employees at various banks and mortgage firms allegedly violated proper procedures, raising concerns that many homeowners may have been unfairly evicted. Though the controversy caused a dip in foreclosures in October, it won't cause a huge drop-off in the number of distressed properties entering the market, says Rick Sharga, senior vice president of RealtyTrac.

According to Sarah Bloom Raskin, a member of the Board of Governors of the Federal Reserve, there will be 2.25 million foreclosures in 2011 -- the same as 2010 -- and another 2 million in 2012. At the rate the banks are going, it will likely take several more years to work through the millions of delinquent mortgages. But on the bright side, if banks continue to foreclose homes gradually, home prices are likely to stay stable.

It's not too late to take advantage of low mortgage rates. While rates are expected to rise slightly in 2011, they will likely remain low -- even under 5 percent -- throughout most of the year. According to the Mortgage Bankers Associates, fixed mortgage rates are expected to average about 4.4 percent in the fourth quarter of 2010 and increase to 5.1 percent by the end of 2011. In November, the Federal Reserve announced that it would buy $600 billion of Treasuries to keep interest rates low and boost economic growth.