Lafayette Real Estate Forecast 2012
Marty Tuominen’s Real Estate market forecast for 2012
After studying the real estate economists and pundits and analyzing our recent trends, I have come up with my forecast for real estate in 2012. I believe this year will be a year led by robust sales and finally a bottoming of prices but not before another 3 to 5% decline. Sales will be driven by first time home buyers and investors. Investors have seen the opportunities to buy at very attractive prices and rent with a very nice positive cash flow. The rental market has been incredibly strong with homeowners who have been forced out of their homes due to a short sale or foreclosure looking to find suitable rental housing. The opportunities for all buyers will get even better as interest rates will soften to perhaps 3.5% by the end of the 1st quarter or mid-year before rising back into the 4%+ range by the year end.
Historical statistics can provide valuable perspective. I focused on the last 5 years of Lafayette sales since it’s market is a surrogate for the broader East Bay market.
Year # homes sold Price per sq ft change from the previous year
2007 281 $540
2008 208 $488 - 9.6%
2009 201 $428 -12.3%
2010 259 $432 +1%
2011 243 $401 -7.2%
Overall the average change from 2007 to 2011 shows a 25.7% decline in sales price per square foot. This number is a composite of all Lafayette sales whether they were an $8 million mansion or a $500,000 foreclosure. If you’re interested in how your home has fared over the last 5 years I can perform in an analysis in your specific price bracket or neighborhood.
2010 bucked the trend as sales were boosted by government incentives for first time and new home buyers. Those incentives expired at the end of 2010 and the market sagged as the previous pent up demand had been absorbed.
The start of 2012 has been marked by a substantial decrease in inventory with 37 homes on the market as of 1/1/12 versus 61 in 2011. Many homes that were unsold after long periods on the market in late 2011 were withdrawn and will reappear on the market in the early spring. This month we are seeing new listings getting snapped up quickly because there are still willing and qualified buyers in the market and very little to choose from in terms of inventory.
I have attached a 24 month sales chart so you can see the typical seasonality of our business. Our spring market tends to start ramping up in mid to late February but I think that may be delayed due to the weather. As our overdue rain has now appeared, I think we’re going to see a very wet 2nd half of January and February. House hunters’ zeal is usually dampened by wet weather.
Once the spring market takes hold in March homes that are properly prepared for the market and priced well will sell quickly with the likely result of full price and multiple offers. There are a substantial amount of pre-qualified buyers sitting on the fence and I believe the combination of more attractive pricing, low interest rates and more choices of homes will finally bring the fence sitters into the market.
March, April and May will be higher sales months in aggregate than we have seen since 2006. The summer will continue the trend with strong sales in anticipation of an increase in interest rates.
As I said earlier prices will finally bottom out in 2012 but I also believe that 2013 and 2014 will be relatively flat in terms of value appreciation. Gone are the days of 10 to 15% per year appreciation. Expect a more modest 3 to 5% appreciation per year beginning in 2014 and beyond.
If you’d like a free, confidential evaluation of your home’s value please feel free to contact me at 925 482 4204 and we can schedule a consultation.
