Millions of people have been making predictions about 2012, ever since the Mayans ruled Central America. Hollywood even made a movie about it! So I figured I'd take a stab at it.
Here we go:
1. Interest rates will remain low
This was an easy prediction since the Fed announced it will keep rates low through out 2012. Expect rates to remain under 5% for most of the year - at least until the Fall when it might start to creep up.
Get your low 30 year fixed rate mortgages will you can!
2. The US economy will grow by 2-3%
While a massive recovery is not expected, a positive number is better than a negative one. Corporations will consider spending some of the $2 trillion sitting on their balance sheets. As they start hiring, consumer confidence will improve further.
People with jobs can qualify for housing, which leads to my next prediction.
3. The number of first-time home buyers will increase
More and more people will see that owning a property is now cheaper than renting in most cities. As the employment picture improves, more buyers will qualify for loans.
First-time buyers will dominate the market since their credit was likely not affected by foreclosures or short sales and they do not have a bad taste for real estate.
4. The stock market will hold steady
This is historically the case during an election year. "The powers that be" will do what it takes to make the economy look healthy.
This doesn't mean the stock market will actually be healthy, but it will appear to be. It could be a good time to self-direct your IRA and buy real estate. Expect the stock market to decline rapidly after elections, mostly due to the fact that Baby Boomer's are pulling money out of their retirement funds.
5. Oil prices will spike
With US withdrawal out of Iraq, warring cultural groups within the country are free to go after each other... and they most likely will. There is also a good chance the US will be at war with Iran. Some economists predict oil prices in the U.S. will rise to $5 and even $7 per gallon.
Buy real estate close to jobs. Sell your SUV.
6. Food costs will spike
Look at your food bill and see how much its increased over the past year. That trend won't stop anytime soon and is a direct result of reckless money creation by the Fed that lowers our spending power.
Buy property only in affordable markets and avoid areas where renters are already stretched. And stock up on food - it's likely cheaper today than it will be tomorrow.
7. Foreign investors will buy up more real estate
A non-U.S. citizen who invests at least $500,000 in the United States is granted permanent resident status (an "Investor Green Card") and is eligible for full U.S. citizenship (under the EB-5 Visa Program.). The visa-holder has the lifelong right to live and work in the United States without restriction.
30% of real estate purchases have been for investment purposes. Expect that number to increase as more foreclosures hit the market and foreigner investors are able to buy them with cash.
8. Rents will continue to rise
Home ownership is declining, while the number of renters is increasing. In fact, according to the Census Bureau, 3.9 million new renters have been added to the pool. Where there's demand, prices increase. Most of today's rental demand is from younger households under the age of 30. These are Baby Boomer children and are expected to be an even larger group than their parents.
Buy rental properties where young people want to live, or buy in neighborhoods where this generation might want to own their first home in 5-10 years.
9. Apartments will be in demand
Young renters like living near town in apartments, for the affordability and proximity to city amenities. Baby boomers also enjoy downsizing to downtown apartment living.
Apartments will be a hot investment this decade. Sell off before 2020, when Boomer kids are ready to buy their own home.
10. Home Construction will Increase
According to John Burns Real estate consulting, new home construction bottomed out in 2011 and will grow 21% in 2012.
Since the cost to build is currently much higher than the cost to buy, buy property near new home sites for a future boom in values.
In Summary:
Things will look rosey in 2012 in preparation for elections. Good economic news will fuel job growth, and more jobs will fuel home sales. Expect price increases on housing (albeit quite small). Jan-April of 2012 will be an optimum time to buy in order to avoid the buying frenzy expected in Spring and Summer.
Speak with a Real Wealth Network investment counselor for tips on the next hottest emerging markets or join us for one of our next property showcase events!
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Hi Kathy
Thank you for a quality post! While I felt I had a reasonable handle on several areas you touched on, it was helpful to see your commentary on petrol at $5-$7 per gallon, rising rents, return of 1st home buyers and the time frame in which to consider investing in apartments.
Antony
Darlin, I'm in line w/ 90% of your thinking, but the 2 to 3% growth I don't see it. More people are condencing, over 1.5 m foreclosures hitting the market. GM is now china motors slave labor. great etc,etc.
Thanks for calling me darlin! It's already happening. 12% growth in Cincinnati last year! It's not typical appreciation, but rather a return to normal pricing. Some areas got so over-corrected that now they are coming back to the middle.