Real Estate Market Forecast for 2007

Real estate is one of the most popular conversation pieces in social settings across the country. It's the one thing that the majority of people in America have in common, and it's no doubt the biggest investment people make in their lifetime. However, as a real estate agent in a coastal North Carolina town, I get asked all the time about what the market is like and how it is projected to be in the future. It's difficult to give an accurate answer, because the real estate market changes rapidly. For instance, just look at the housing frenzy in 2005. But by analyzing recent trends I've forecasted what the market will be like, in my opinion, in 2007.

Prices will continue to level off and fall.

For those of you that were looking to buy a home in 2005, including myself, you found out that homes were often selling for over asking price and receiving multiple offer bids. It was chaos, and the sellers loved every bit of it. But for the buyers, it was a nightmare. However, that was only in certain real estate pockets across the country. I'm forecasting in 2007 that home prices will continue to fall in most markets and appreciation will level off. Just like 2006, there will be a steady decrease in home sales, with the exceptions of the peak months of April through August. I also believe there will be a dramatic increase in foreclosures, being that many of the buyers that purchased homes in 2005 ended up buying homes that exceeded what they could afford just so they could be done with the process.

Positive Things.

I know that it doesn't sound promising so far, but there are some positive things projected for 2007. For instance, with home prices declining it will make the dream of buying a home in many markets a reality. During 2004 and 2005, home prices appreciated rapidly and housing became extremely unaffordable. This year and next year will provide the opportunity for buyers to enter a market where prices are cooling off from blazing hot 2005 real estate market.

Part of the phenomenon of 2005 was the emergence of investors. With shows like "Flip That House" becoming mainstream television, homeowners decided to take investing into their own hands and taking advantage of low interest rates. Investors bought up everything they could find, gutted the homes to the studs, and remodeled them for appreciation as much as 50%. However, as the real estate market softened in 2006 it was largely due to buyers that couldn't afford the markup on pricing, and now those investors are forced to dump their property onto the open market. This has flooded the market and buyers are actually left with many choices, a big difference from 2005. If you're a buyer and you're considering purchasing a home in 2007, then you're going to love it. Investors are very motivated to negotiate on price and interest rates are expected to be low, which leads me to my next point.

The Wild Card.

Interest rates are a big part of what fuels the real estate market, and they are as unpredictable as Paris Hilton's love life. The laws of supply and demand will tell you that, though 2007 will be slightly down in sales, it's one year closer to a brighter real estate market. We all know that in every aspect of sales there are high moments and certainly low ones. We are going to see a low one in 2007, but the interest rates should remain low, too. The Mortgage Bankers Association of America expects the Federal Rate to remain at 5.3, while a 30 year mortgage will hover around the 6.5%, and the one year ARM will stay at 5.8%. According to the National Association of Realtors, the Federal Rate will fall to 4.8% by the end of 2007. As you can see, a few difference sources predict the rates to either stay steady or fall slightly in 2007, opening the doors for many buyers looking for affordable opportunities.

The reality of the situation is the real estate market, although it's not going to be a great year, will be simply flat in 2007. Many experts are optimistic about the outlook of 2008, so just buckle up and brace yourself until we get there.

New Construction.

The biggest area to take the hit in 2007, in my opinion, will be with new construction. Many real estate pockets across the country that were fueled by new construction, such as Southern California and Florida, 2007 will be falling rapidly.

However, each different pocket is different. For instance, while Florida and Michigan will see plummeting new construction number, other markets like Seattle will continue to rise because of the market growth and strong economy. No matter how you look at it, it's important to remember that with new home construction numbers dwindling and prices dropping, the buyers involved in the market will absorb the inventory and keep the supply-demand machine well oiled. This will allow builders to fund other projects, projects that will have realistic prices and longer days on the market.

My biggest concern with the real estate market is the media. While the media is saying the real estate market across the country is terrible, I feel as if they are instilling an unnecessary fear within the people of this country. Any real estate agent will tell you that right now is a perfect time to buy a home. There are plenty of homes on the market to choose from, the rates are low, and sellers are highly negotiable due to the longer time they've had their home on the open market. Don't let a flat market scare you away. In fact, take advantage of it and get in at a lower price so that you'll see the rewards come late 2008 or 2009.