2012 real estate thumbs up and down

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As we contemplate the slowly recovering real estate market of 2011, it’s time to look at what real estate will do in 2012.

The first three quarters of 2012 may be the hardest to be optimistic about and receive a thumbs down.

But, we anticipate the last quarter of the year to have a cautiously optimistic outcome.

A two-thumbs up goes to the apartment category.

Investors will be buying multi-family properties all over the nation.

Whether it’s high-end apartments (class A) or lower-end apartments (B and C), investors are already clamoring over them.

Existing apartment stock can’t keep up with the demand from the busted housing market. Foreclosure-weary homeowners are leaving for headache-free apartment living. Additionally, the “Generation Y” group will be increasing apartment demand.

These 20-somethings are the fastest growing population of the workforce at an estimated 70 million. They will demand urban-oriented, tech-savvy, metropolitan living and will drive additional apartment investments.

A one-thumbs up goes to real estate located in job centers.

Real estate returns tend to closely follow employment trends.

Energy, high-tech, and healthcare jobs will rule the day in 2012.

Universities and government jobs will also lead the way for employment.

Find cities with employment promise and you’ll find cities that bode well for your real estate investment.

One concern for 2012 is the banking industry.

According to a recent study by Urban Land Institute in their Emerging Trends survey, there will be a lack of critical funding for refinancing needs.

Concern still exists with bankers’ reluctance to lend given the low interest rate environment.

It’s ironic that these low rates may actually slow down the recovery by discouraging lending.

Given this reluctance, many bankers will prefer to hold on and extend loans for borrowers who are paying their monthly notes, despite the fact that the underlying real estate value has not improved from underwater status.

An optimistic view of the last quarter of this year stems from the election process’s effect on business decisions.

Whether that is through changes in the executive branch or through Congress, many feel that the uncertainty of the real estate markets will be settled by a stabilized political structure.

And, since real estate values are based on long-term trends, stabilization of regulatory requirements will help future real estate earnings.

Brian Patton, CCIM is a commercial real estate broker, author and instructor. He can be reached via his website at: www.CommercialPropertyGuy.com.