I recently read an article on HGTV’s Frontdoor website about the up and coming national housing trends for 2011 as well as several other market forecasts for the year by other reputable authors.
I wasn’t really surprised by many of the predictive forecasts but thought a localized Huntsville viewpoint would add some value for regular readers. While the Huntsville Real Estate Market has certainly not been immune from the nation’s recent financial issues, we have performed better than many mid-sized and larger markets.
#1: Housing recovery unlikely, but cautious optimism remains
National: A market comeback is contingent on a solution to the foreclosure crisis, which is suppressing home prices and consumer confidence in many major markets. Thus a national recovery is not likely within the next year while business opportunities exist in foreclosure sales and the continuing low mortgage rates.
Local: Huntsville Home Prices have remained relatively flat to 1-2% lower depending on price range and location over the last 3 years. Next year is another relocation year for the local area as BRAC is still ongoing. However all the news is not good: Home Sales have declined the past 3 years while Housing Inventory levels have grown. Agents waiting on the market to return to ‘normal‘ will continue to be disappointed because they have a fundamental error in their logic; the housing bubble of 2003-2007 was the ‘abnormal‘ market.
#2: McMansions are out; compact housing is in!
National: The era of the McMansion is over. Not only are baby boomers downsizing to more manageable homes, but first-time buyers are also entering the market with extremely different tastes than their parents. As baby boomers move into smaller homes, who will they sell their large suburban homes to? We could soon see a glut of large homes languishing on the market.
Local: Huntsville is not immune to demographics. Gen X and Y buyers are more interested in smaller homes in vibrant, compact, more urban or neo-traditional neighborhoods. Huntsville’s inventory of upper end homes is already high and slow to sell, I expect this situation to worsen during 2011-2012. Buyers should utilize caution about entering the market in new proposed or incomplete neighborhoods in the upper price ranges.
#3: More foreclosures to come
National: Foreclosure processing was delayed this fall by the “robo-signing scandal” — in which employees at various banks allegedly violated proper procedures. According to the Board of Governors of the Federal Reserve, there will be 2.25 million foreclosures in 2011 — the same as 2010 — and another 2 million in 2012. At the rate the banks are going, it will likely take several more years to work through the millions of delinquent mortgages.
Local: Huntsville has had its share of foreclosures and they continue, however all through the housing crisis Huntsville Foreclosure Rates have been significantly less than the national average and rates have improved over the past few quarters. Just last month RealtyTrac announced that the Huntsville Alabama Metro Area ranked number 182 out of the 206 metropolitan areas they follow. Its good to be on the bottom of some lists!
#4: A new look at lending standards
National: Buying a home has become more difficult ever since lenders tightened their standards on loans insured by the Federal Housing Administration. Several lenders, including Wells Fargo & Co. and Bank of America, have raised the minimum credit score on FHA-insured loans to 640 and 660 for some products from 620.
Local: Personally, I think the tougher standards are a warm welcome. Literally anyone with a pulse could buy a home during the bubble. Where did that get us? Many more potential home buyers will be considering Huntsville Lease Purchase Options during the next few years, creating opportunities within the property management segment of the business. Some Huntsville home sellers will also have to give more serious consideration to leasing their home over the short term.
#5: Continued Real Estate Brokerage Shake-Up
National: The National Association of Realtors® (NAR) predicts that the number of real estate agents and brokers will continue to decline. Nationally over the last four years, the number of licensed real estate agents and brokers has declined by approximately 25%. Since the peak of the real estate boom, the number of transactions has declined by about 33% and gross commissions have declined by about 50% since the start of the housing downturn.
Local: Huntsville has seen home sales and thus commission revenues decline some 35-40% over the last 3 years, however the number of real estate agents and brokerages has not experienced a similar decline as on the national level, as we have an abundant number of part-timers in the business. – However Huntsville has experienced some major brokerage shakeups and take overs; Crye-Leike’s purchase of the local Coldwell Banker Franchise, Re/Max’s dissolution and split into Summit Realtors and 2 new Re/Max franchises, among others, and several entrepreneurial Boutique start-ups formed including our own @Homes Realty. I expect to see more and more of these shifts in the local business makeup over the next few years as the local Realtor® community continues to adjust to new business realities. With our own ideas of the brokerage of the future we welcome the continued and coming changes.
Here’s to a prosperous 2011 for all of us. Chin up and one step at a time