What Kind of Real Estate Forecast Can We Make for 2012?

The National Bureau of Economic Research, a group of independent economists, had declared that the recession ended in June of 2009.  RECESSION ENDS IN 2009The Bureau took more than a year to decide that we started the recession in December of 2007 and decided in the summer of 2010 that the recession ended in June 2009.  This recession has been the longest and deepest recession the country ever experienced. 

Many people know that we are now undergoing the longest, slowest, most painful recovery the country has ever experienced.  Now in January 2012, two and a half years after the recession “ended”, we are seeing hopeful signs of life in some areas of the economic picture.  MA UNEMPLOYMENT 1991 TO 2011The unemployment rate in Massachusetts has fallen to its lowest level in a long time to 7.3%.  Some industries are beginning to experience growth and we can only hope they continue to hire and create new jobs.

One area we continue to struggle with is housing.  The actual loss of wealth for so many people in this country is staggering.  The California Association of Realtors has released its real estate forecast for 2012. 

It is interesting to see that in 2005 they sold 625,000 homes and in 2007  that number dropped to 346,900—a 55% drop in the number of sales.  The median price of homes in 2005 was $522,700, but by 2011 the median prices have dropped to $291,000—a 56% drop in value.   All real estate is local, but some parts of California, Nevada, and Florida have experienced over 75% loss in value.

Massachusetts, and particularly Boston, has fared much better than many of the states.  Trulia has come out with its top five places slated for a quicker recovery:  Austin, Houston, San Jose, Boston, (and in particular Cambridge, Newton, Framingham, and Worcester) and Rochester, NY.  Austin and Houston have seen jobs and new construction get a jump-start.  San Jose and Boston areas are home to the technology belt with lots of smart, well-educated people, and Rochester  has had stable prices and economy throughout the downturn.  The take away is that highly educated, tech-savvy cities may push through the recovery quicker than other parts of the country.

Realtors have not been able to see the bottoming of prices yet,  but I expect this year will be it.   Once we have hit the bottom, it will be a slow climb back up, but there truly is light at the end of the tunnel.  I first saw the warning signs of trouble in 2005, and after 6 years of serious turmoil,  I believe we are past the worst.

The new economic reality may be something we have to get used to, because this complete recovery may be many years in the making.  Some people, like seniors, who have done everything right, have had their planned retirement future smashed by the dramatic loss of wealth.  We are already seeing not only seniors, but young college graduates moving back to the family home.  This may be the new reality for now as we all adjust to the slow recovery.  But I am looking forward to 2012 as our turn around year.  What do you think?

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