Once again I will go out on a limb and share my thoughts for the upcoming Lake Norman real estate market in 2011. If we look back at last year’s predictions ( See my 2010 predictions ) I do believe that I anticipated more of a “turning point” than we actually experienced. In 2010, the only turning point was our sales volume which, while not inconsequential, was not entirely what I had in mind for our local Lake Norman housing market.
So, exactly what can we expect to see in our Lake Norman housing market in 2011? Quite simply: “more of the same”. Bargains, foreclosures and shortsales will dominate our market sales but we will continue to see tiny incremental improvements. Before I go into more detail, let’s look at the larger issues that will impact our local market.
The Big Picture:
Unlike last year when financial institutions and the national financial issues like the foreclosure freezes, rebate incentives and actions by FHA and the Federal Reserve dominated the national housing market, this year it is all about jobs, consumer confidence and business spending.
- Most economists seem to agree that our country will experience a modest 3% growth in 2011
- Interest rates will remain low; hovering around 5%. (They are back down this week after a few weeks of increases due to concerns about inflation.)
- Home loans will continue to be a very challenging process and will play a role in hindering the ability for our housing market to improve
- Like last year, only a modest rebound in housing starts is expected. Builders who have survived are still finding it nearly impossible to get loans for new projects and spec building is almost not existent. The National Association of Home Builders is projecting a 21% increase in new housing but is quick to qualify that this is not a significant number. They do predict that 2011 will be the year the national housing prices should hit their bottom.
- A “weak recovery” in our national economy means that the jobless rate will remain “uncomfortably high” and unemployment trends will “dominate how Americans feel about the economy.”
- National Association of Realtors chief economist Lawrence Yun said: “There will be two steps forward, one step back, with sizable local market differences…” He goes on to predict a slight increase in home sales nationally.
- Altos Research predicts that housing prices nationally will drop 5 to 10% and finally hit bottom.
- False bottoms and starts and stops
- Foreclosure delays as banks sit on them due to the cost of processing
- Local housing inventory levels. Potential “shadow” inventory hitting the market and driving the number of homes for sale up and demand down
- Lending standards and potential changes to regulations from Washington
- International economic issues like Europe’s currency dilemma and China’s trade growth/manipulation
Our Lake Norman housing market is also going to be impacted significantly by regional economic components, especially jobs.
- North Carolina’s economic conditions are expected to improve in 2011. This was a theme of the Economic Forecast Forum in Rearch Triangle Park according to an article in News Observer on January 3rd. However, they also acknowledged that North Carolina suffers more than most from the national decline of industrial jobs.
- North Carolina is still a destination for many from around the country. In 2010 North Carolina rose to 3rd place on the list of migration to rather than from the state.
- Jobs play a huge role in our recovery. Unemployment rates in Mecklenburg and Iredell Counties remain higher than the state average. Everyone agrees that we must see improvement in our unemployment numbers before we will see any significant change in our housing market.
- Bargains will continue to drive the market. More and more home-buyers who have been sitting on the fence will realized that these bargains, once gone, won’t necessarily be replaced so they will be more confident and motivated in 2011. (Or they risk loosing out).
- A year of foreclosures and short sales. Sellers who have been hoping to sell at a price that allows them to at least break even are going to run out of time. We will continue to see active listings slowly evolving into short sales or foreclosures.
- Shadow Inventory? One of the biggest questions I have is just how many Lake Norman homeowners are either waiting to sell until they see a turn in the market or have withdrawn their homes from the market (which accounts for our drop in inventory) while planning to bring them back on the market once they see signs of improvement. If, just when our inventory of homes gets down to a hood number (6-8 months of supply), a large number of sellers who have been waiting jump into the market, then we will again face high levels of inventory and a second round of a buyers market.
- More of the same is what most everyone is saying throughout the country. Personally, I don’t think it will be an exciting year with significant changes but rather a slow, methodical road towards future stability and recovery. 2011 may hold some surprises but for the most part it will be a year of stops and starts; ups and downs and hopefully dwindling inventory.
I would love to hear your thoughts and predictions. Please leave a comment!