House Prices-On the rise or fall in 2011?
Will house prices bottom in 2011?
Hard question to answer! Here's some variables that might help us in the year that is ahead...
We need to continue to watch inventory and months-of-supply closely for hints about house prices. Right now, house prices are falling at about a 10% annual rate, so we are not at the bottom of house prices just yet! We should have expected home sales to drop, being that the first time home buyers credit is over. Home sales have since showed signed of stabilization and home prices WILL follow with a lag...
I think national house prices will decline another 3% to 6% from the October 2010 levels. I think it's likely that house prices will bottom in the first or second quarter of 2011. Prices will steadily rise from there and there will be a 10% to 15% rise in existing home sales for 2011.
Almost $2 million people alone lost there jobs in the construction field since 2005. This does not count the people who lost jobs in construction "related" fields. The good news is residential investment will probably make a positive contribution to GDP growth for the first time since 2005. And residential construction employment will probably increase in 2011. The National Association of Home Builders is predicting new Single Family Housing starts to rise by 20% in 2011. I think alot of people will be happy to hear this.
How much will foreclosure activity pick up in 2011? Will the number of REOs peak in 2011 and start to decline?
An article from Wall Street Journal states: "We need job growth (and that would mean household formation absorbing the excess supply) and Housing (new construction) completions are at record lows (not adding to the excess supply)." New housing construction is stuck at its lowest levels in more than 40 years. "That will help absorb supply in ways that a lot of people underestimate." I agree 100%.
With our market improving, more job openings, & slight economic growth, the rates of foreclosures & REO's will certainly decrease. My guess is the overall the number of REO's has peaked, although I expect the delinquency rate to stay elevated for some time.
How much will the economy grow in 2011?
There are still plenty of scars from the financial crisis (excessive debt, high unemployment, excess capacity, excess supply of housing, a large number of homeowners with negative equity, and high foreclosure activity), but the economy is slowly healing. And even though residential investment will be weak in 2011, I think RI will make a positive contribution to GDP growth for the first time since 2005.
However my guess is growth will be certainly not rocket overnight, but I'd be confident that it's going to be above the 2010 growth rate. I estimate this year, in 2011, there will be between 3.5% and 4.0% real GDP growth.
THINGS ARE LOOKING BETTER!!!