The Question of the Day is...? "It's the new year, which road is the real estate market going to take?

Well, brace yourselves. Here comes another one of those "John predictions" - as I stated above, I believe this year is going to be a "banner year." There is a small bit of logic to my madness.

So first, let's state the obvious: across the board the real estate "inventory is low," and "interest rates are at an all time low." Rents in a middle income neighborhood are equal to an entry level purchase mortgage payment in a nice neighborhood. The banks are busting at the seams with foreclosed inventory that has not hit the market and in 2013 the Healthcare Tax of 3.8% will come into play for many home sellers in California. (more info found at http://www.snopes.com/politics/taxes/realestate.asp)

Now, ask yourselves if this is not a perfect recipe for a lot of activity in the real estate market? Let me add the final ingredient, "it's an election year!" In an election year, politicians in office will tend to do what they can to "not make waves." Or, as President Obama did earlier in his administration, offer incentives, such as the "$8,000 tax credit" to first-time buyers, (the state of California offered first-time buyer incentives as well). These were temporary and when they expired, so did the real estate market surge.

My 2012 prediction is this: starting around late this month, the real estate inventory is going to begin to surge. The entry-level buyers and cash investors will be competing heavily for the new influx of the lower priced inventory of homes. Many of the sellers with prices below $450,000 will be seeking to move up, trying to elevate the quality and size of their home and neighborhood.

This should be the year of a long-awaited boom for those mid to higher-end home sellers, with prices between $650,000 and $850,000. However, the tight credit restrictions will continue to impede the higher-end and super high-end home sales. These home sales will need to have very strong buyers, having 30 to 40 percent down payments. Prices in these markets may still have a 5% to 10% decline before hitting bottom.

Overall, for this year, I am looking forward to more real estate transactions and to help make it a banner year!