Monday, February 6, 2012

2012 Real Estate Outlook: Introduction

2012 Real Estate Outlook: Introduction
2012 Real Estate Outlook: The Rise (1980 - 2006)
2012 Real Estate Outlook: The Fall (2006 - 2011)
2012 Real Estate Outlook: Where We Are Today
2012 Real Estate Outlook: Where We Are Going
2012 Real Estate Outlook: Demand - Willingness
2012 Real Estate Outlook: Demand - Ability
2012 Real Estate Outlook: Supply - Local Market
2012 Real Estate Outlook: Supply - Shadow Inventory
2012 Real Estate Outlook: Conclusion
2012 Real Estate Outlook: Commercial Real Estate

This forecast is the final piece to the complete 2012 Outlook, released in January.

I have been involved with the real estate industry my entire working life.  My first position was with a home builder in Charlotte, NC which eventually took me to Virginia to work for another home builder, which eventually took me back down to Charlotte to help a small group of former division presidents start their own company.

Working with that group led me to the company I am with now, handling a small amount of general brokerage, but mainly focused on larger projects and consulting for banks and their distressed assets.

Being on the front lines of both the run up and the subsequent collapse of the real estate market created an insatiable passion to understand what created the bubble and why it popped.  In my process of understanding the greatest bubble in modern history, I also became fascinated with both finance and economics in general, which led to even more study and the creation of this web page.

However, my heart has always stayed with real estate.  I have spent thousands of dollars and a tremendous amount of vacation time traveling around the country to commercial real estate seminars (where a large group of people sit in a room and analyze the profit and loss statements for commercial buildings).  It is heaven for a nerd like me.

Today, I am asked by friends, family, readers of this site and customers I work with in my business, "where do you see real estate prices going now?"  A complete answer takes some considerable time so I have decided to do it here.  The following provides both a complete discussion on what creates real estate price movement combined with real time data and an outlook on the future market direction.

We will begin with why real estate prices rose to where they did and why they fell. Understanding the 1980 - 2011 period is critical to understanding where real estate prices will move from here.  Then we will look at the two fundamental factors that drive any price: supply and demand.  The conversation is meant to open your eyes to factors that are often overlooked when making what may be the largest investment of your life.

Someone took the time to walk me through a large portion of the information presented here back in 2007.  After careful consideration, I walked away from a contract on a town home I was ready to purchase in Virginia in foreclosure for $205,000 ($20,000 less than the asking price).  The price of the town home has since fallen to below $120,000 and continues downward in one of the most desirable housing locations in the country.

I hope that this information can help others as much as it has helped me.  Let's begin our discussion first with how we got here:

Next: 2012 Real Estate Outlook: The Rise (1980 - 2006)