Top 10 Real Estate Predictions for 2011

Wonder what the real estate market will do in 2011? Only time will tell, but we can examine some trends from the past and look at what is happening today to get a pretty good idea of what this year will mean for home buyers and home sellers.

Here are 10 things I predict will happen in 2011’s real estate market:

1. “Recovery” is the Hot Buzz Word. In a market that appears as if it can do nothing but go up, a majority of everyone’s focus this coming year will be on recovery. The not so great news is that recovery is around the corner, but not necessarily the immediate proverbial corner. The better news is that recovery is in sight. Home prices may fluctuate a little, moving up or down just a bit, but they should remain relatively flat for 2011.

2. Real Estate Brokerages will Merge. In a desperate market, many find the need to consolidate in effort to stay afloat. Smaller real estate companies are struggling to keep their doors open with expenses and a slow market. As a result, many of them may merge with larger companies better able to sustain the ups and downs of the market.

3. Sales of Entry Level Homes will Dominate. With the lower prices of homes today and decreased insurance prices, those looking to get into their first home will be commonplace in the market. These affordable prices mean someone who has never owned a home should and will take advantage of the state of the real estate market today.

4. Some Luxury Homes Will Sell as Short Sales. Nicer homes are often bought with a larger down payment. While this gives a certain amount of wiggle room in the short term because mortgage payments are typically lower, the owners of these homes are worried.

The wealthy who buy the large luxury homes usually count on a nice retirement in their later years. As the market continues to decline or plateau, so are retirement accounts. Some are choosing to get out of their homes as quickly as possible to funnel more money into retirement before it is too late. This trend will likely continue in the new year.

5. Mortgages Will Continue to Be Cheap. Since credit score requirements to receive a loan have gone up, it is more difficult to get a loan. As a result, experts predict the federal government will likely keep interest rates low to stimulate the real estate market.

6. Mortgage Interest Deductions will Remain. There has been worry that Congress may take away mortgage interest deductions from Americans. Most believe, however, this is unlikely to happen since it would cripple the already handicapped housing market.

7. Loan Modifications will Fail. More than half of all loan modifications are in default. Simply put: Loan modifications don’t work. They fail to reduce the principal amount of the loan so a homeowner is still left owing more than they are able to pay. Six to nine months after the modification, the homeowner is typically right back where they started: unable to pay their mortgage.

8. Cash Investors will Win. Cash talks much louder today than credit. Obtaining a loan you will pay out over time is much riskier to a seller than putting down cash on something. Sometimes you can even pay less on an investment if you pay in cash.

9. Many Mortgage Brokers will Fold. A law passed in 2008 which dictated new guidelines for mortgage brokers went into full effect on January 1, 2011. These new rules are much stricter and make being a mortgage broker more difficult. Many will simply go out of business.

10. Foreclosure and Short Sale Lawsuits will Start. Think you are off scot free once you have a foreclosure or short sale? Think again! In fact, lenders can still pursue you after you think you’ve washed your hands of a bad home loan. In many states, you can be sued for the liability of the remainder of a loan. This means if your home went into foreclosure or short sale and the lender didn’t retrieve the total amount owed, they can still pursue you for the remaining amount.