We asked top real estate experts Ilyce Glink of Thinkglink.com, Paul Bishop of the National Association of Realtors, Barbara Corcoran of the Today show, and Dan Green of TheMortgageReports.com to share their thoughts on the housing market in 2011. Here's their takeaway on what to expect.
Glum market fundamentals, limited bright spots
Ilyce Glink is the publisher at Thinkglink.com.
Real estate isn't much better than in the past two years. Unemployment is still high, and real estate sales are tied to jobs. Unemployment might have to go below 8 percent before the market is spurred.
Even with record low interest rates, lots of people don't qualify to buy a house. And the number of households is shrinking. People don't have enough money to live separately. Also, foreclosure is impacting housing enormously. Buyers don't want to pay what sellers want. That drives down prices.
Some markets are very tough, like Florida, Michigan, Arizona and parts of Illinois. Prices may not have hit bottom. But it's localized; even in Florida, some pockets are doing OK. Across the country, homes prices are up 1 percent. But after falling 35 percent, prices aren't going to jump that much. This massive drop is unprecedented in the past 100 years.
I expect existing and new home sales to be weak this year.
Headwinds will temper recovery
Paul Bishop is an economist at the National Association of Realtors (NAR).
The real estate market will recover slightly this year. It won't bounce back like you'd expect.
What's pushing the housing market is low mortgage rates, high housing affordability and some economic growth. We're adding jobs at a modest pace.
Headwinds include high unemployment, and our forecast doesn't suggest that it will drop. And foreclosures are keeping the market from moving ahead more quickly. High levels of foreclosures exist in areas such as Florida, Nevada, parts of Michigan, and Ohio. Consumers will be more cautious. They don't want to buy a home today because they fear falling prices. And there's new concern about the process itself. It's such a mess. We don't know what the impact will be.
There are signs that the market is stabilizing.
Hardest hit areas are mostly at or near [price] bottoms. Best performing areas are in the middle of the country, from Texas up to North Dakota. They avoided subprime mortgages and never saw rapid increases in price. They haven't suffered as much. And they're not dependent on [cyclical] business like finance, retailing and construction.
Short-term, supply is high. About 4 million homes are on the market. That's 10.7 months of inventory, which hasn't changed much in the past few months. We hope to get to the 8- or 9-month range by the middle of this year, partly driven by population growth. It won't be a straight line up, though.
Mortgage rates will rise. NAR expects them to average 4.8 percent this year.
More of the same in 2011
Barbara Corcoran is a nationally known real estate and business expert.
I see more of the same this year, for a few reasons. There will be more foreclosures. And getting a new mortgage is great if you have a stellar credit rating. It's as if amazingly low interest rates were rendered meaningless.
There are rays of hope, though. As many markets are up as down in the third quarter, according to NAR. Florida, southern California and Nevada haven't hit bottom yet. Until we get rid of foreclosures, we can't have a rebound.
There are pockets of growth. Boston is in good shape, and Columbus, Ohio, is doing well. Parts of Florida are happier prospects, like the Treasure Coast. Markets with momentum should have an easier time this year. Metropolitan areas always lead the parade.
The government should lower mortgage rates for everyone. It's like a Cash for Clunkers program, but for houses.
Mortgage rates: a sprung coil
Dan Green is a loan officer at Waterstone Mortgage and writes TheMortgageReports.com.
There's more room for mortgage rates to rise than fall. I tell clients to lock in something now. When rates start to rise, they'll rise quickly. There is lots of concern about ARM (adjustable-rate mortgage) resets. But I never believed that. The ARMs adjusting in 2011 are tied to LIBOR, and it's cheap. Most mortgages are going to adjust down.
But mortgage guidelines will get tighter. It will be harder to be approved. There's extra scrutiny by banks. They've raised their minimum requirements so the loans are better. That decreases the buyer pool.
Constance Gustke is a New York-based journalist who writes about business topics. She was a Fortune reporter, Forbes.com contributor and Worth features editor. Gustke is also a regular contributor to CNBC.