Yesterday we talked about Rob Hirt’s presentation about what went wrong. Rob also went through his predictions for this year (about 2/3 correct, but even on the ones he wasn’t right on he was mostly close) and then finally gave us his predictions for 2011:
- Rob says the shape of the economic recovery will not be a V, (sharp down, sharp recovery) a W (a double dip recession) or a U (steep slide down, long bottom, steep recovery), but rather a square root sign, with a sharp checkmark type down and then a sloped upward movement followed by a plateau. He feels that the reason we are having the QEII quantitative easing is to try to get that plateau to go up again.
- Staying low for a long time is his prediction of the interest rates (good news, buyers and investors!) with the usual minor movements up and down, range bounded by plus or minus 0.5%.
- He predicts the stock market will hover between 10,000 and 12,000
- He believes most foreign governments will follow our lead with their currencies, as they cannot allow us to increase too much against theirs or they will hurt their exports and increase the desirability of US goods against their own.
- Rob believes all markets are driven by fear or greed. Greed is what got us into this mess. Fear is still the dominant investor motivation right now and will stay that way until 2012.
- He believes that despite the new incoming Republican Congress, the Dodd-Frank bill will NOT be repealed.
- He believes that the Bush tax cuts will be extended for at least 2 years. (Note: this author believes they will be extended for all except the top 1%)
- He believes Obama will move more to the center in order to improve chances of reelection. (Note: this author believes he will move more left in order to avoid a primary challenge.)
- Single family home sales will go up 9 percent compared to 2010, with a volume similar to 2009. New home starts will be up 23 percent in 2011 compared to 2010. Single family home resales in 2012 will be up 5 % over 2011, with new homes up in 2012 an additional 22 percent.
- Median prices in California will rise 2 percent.
It will be interesting to see how accurate he is this year. I too believe that we will see home prices increase in 2011, although I think maybe in the South Bay it will be higher than 2 percent. We are already seeing that 25 percent of sales are to all cash buyers and that on 55 percent of purchases there are multiple offers. This kind of inventory pressure will continue I believe and prices will have to rise as a result.
Don’t get left out wishing you had done something!