Housing Outlook 2011

The lowest mortgage interest rate in almost 60 years, plus much more affordable home prices locally and nationally, should foreshadow a turning point in the housing market. All of this is somewhat tempered, of course, with the reality of a high foreclosure rate, high unemployment and tight credit -- so don't expect a miraculous reversal overnight.

For the four year time period beginning with the downturn in mid 2006, the median price of an existing home nationwide fell by 27% according to FiservCase-Shiller, a home-price research firm. The median home now sells for $177,000, a bit more than what it would have fetched in 2003. The plunge has left 23% of mortgage borrowers underwater -- that is they owe more on their mortgage than the market value of their home. Those selling homes in the Village this year are acutely aware of the impact of these falling home prices.

The Village has not been immune to price declines in 2010 but fortunately not on the order of the national decline. And, a year-over-year analysis of unit home sales actually shows that sales are ahead of last year with November showing significant month over month strength. "It appears that the Village bottomed out in 2009 and has begun to emerge from the abyss this year," said Jeff Hollansworth , owner of the local RE/MAX franchise. "Prices continued to decline in 2010. This decline, however, precipitated an uptick in the number of buyers coming in to take advantage of the more attractive prices. This is reflected in the shrinking number of home listings on the market which now stands at 415 and, by all estimates, peaked earlier this year at an all time high of 525 listed homes.

Recent comments from Bank of America economist Michelle Meyer indicate that consumer confidence is the all important ingredient to an improving housing market. "To buoy consumer confidence and put home sales on a strong, upward trajectory, job growth will have to be considerable and the unemployment rate clearly receding." Meyer agrees that we could see that begin to occur in the second half of 2011, but, she says, "it will be a slow process." Fiserv also expects the housing market to finally hit bottom in mid 2011, with another 7% decline in the U.S. median home price for the year ending June 30, 2011.

Living behind the security of the Village gates, it’s natural to believe that what happens nationally doesn't have the same impact on our community. The last three years has taught us differently. The good news is that home depreciation has not been quite as severe as the national collapse albeit there is still plenty of pain to go around. RE/MAX is viewing 2011 as a turnaround year. November was one of the company's best months in years with an astounding 40 homes contracted in the month. With elections and tax policy now behind us, consumers are beginning to gain confidence and this can be felt all the way down to our local market. RE/MAX has made substantial investments in national marketing and Internet expertise which has allowed the company to bring in more Home Buyers than all its competitors combined, over the past two years. RE/MAX is bullish about what 2011 holds and sees the coming year as a turning-point in the local housing market. Full steam ahead!