Predictions 2011: Diana Olick On Real Estate

1. Inventories of homes for sale (new, existing and bank-owned) hit a new high this Spring.

As banks work their way through enormous backlogs of delinquent loans, they will repossess homes at a record pace and volume. Sellers will likely take their homes off the market during the winter, but all that pent-up seller demand, coupled with, perhaps, a little more confidence from an improving jobs market, will push more sellers to list come Spring. Add in the low sales pace, and inventories will skyrocket.

2. Builders will put more holes in the ground.

Right now housing starts are running near record lows and still falling, but builders believe pent up buyer-demand is coming. As banks begin to loosen credit to builders ever so slightly, they will jump at the opportunity to start new homes. They still have land, and the big builders especially will not want to be left without inventory when demand starts to bloom again.

3. No GSE reform.

The Obama administration has promised a proposal in January to reform the currently government-sponsored entities, Fannie Mae and Freddie Mac. There will be plenty of analysis and debate, gobs of hearings on the Capitol Hill, and industry associations will push their agendas at a fever pitch. But with the House and Senate under different party leadership, and the mortgage market still precarious, that's all it will be, for 2011 at least—talk.

4. The office and apartment sectors will gain again.

As the job market slowly recovers, and companies begin hiring again, prime office space will increase in value. The bigger cities will see it first, and the most sought-after spaces will see the biggest jump. The growth will be slow at first, as offices refill shadow space, that is, desks within offices that currently sit empty.

Job gains will also push more young Americans to rent again. Many are now living with their parents or doubling up with friends, but as they see gains at work, they will want their own spaces again. They will not choose to buy, because they don't have the means or the stomachs for the housing market.

5. Spring will tell.

This spring will be a crucial turning point in housing. High inventories and lower prices will either be too much for sellers to stomach or create the kind of bargain-buying bonanza that the market needs to find its footing. Jobs will be key, as will consumer confidence. Investor demand for foreclosures will be the wild card. If buyers don't come back this Spring, we're in for another leg down.

As for my2010 predictions, I was wrong about two, right about one with the fourth something of a toss up,

The housing market did not begin to recover. The home-buyer tax credit inflated numbers at the beginning of the year then suffered a steep falloff.

Mortgage rates did not rise, as I thought, as investor kept investors running to Treasurys, sending all rates lower.

Foreclosure inventory, however, rose, as expected; I could see the rising number of redefaults in modifications and the few borrowers qualifying for them in the first place.

Meanwhile, commercial real estate is still slogging along, as the job market's improvement is very slow.