Photos: What will your home be worth in 2012

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  1. Alaska

    Metro: Anchorage
    What a home will be worth in 2012: N/A*
    Q4 2008 price: N/A
    Projected price change by MSA: +12.8%
    Projected price change by state: +12.1%

    Alaska's largest city, with more than 40 percent of the state's population, Anchorage has a relatively strong economy boosted by oil production, military bases, and tourism. The city, which has an international airport, skyscrapers, and major hospitals, is a base for many travelers visiting surrounding wilderness and scenic areas.

    *Data not available (Getty Images) Back to slideshow navigation
  2. Connecticut

    Metro: Hartford-West Hartford-East Hartford
    What a home will be worth in 2012: $212,150
    Q4 2008 price : $226,000
    Projected price change by MSA: -6.1%
    Projected price change by state: -8.2%

    Hartford, the state capital, is also known as the Insurance Capital of the World. It is home to Aetna, the Hartford, Travelers, and other insurance companies. Unfortunately, the city had been struggling for years before the current downturn. While it did not have the exposure to the housing bust that many other metros did, other factors will continue to weigh on its economy. (Bob Falcetti / Getty Images) Back to slideshow navigation
  3. Texas

    Metro: Houston-Sugar Land-Baytown
    What a home will be worth in 2012: $160,471
    Q4 2008 price: $160,000
    Projected price change by MSA: 0.3%
    Projected price change by state: -0.1%

    Texas in general and Houston in particular have been spared the worst of the downturn, thanks in large part to the energy industry. The sixth-largest metropolitan area in the country will hold steady over the next four years. Prices are expected to dip a bit in 2009 and 2010, but regain ground by 2012. (Getty Images) Back to slideshow navigation
  4. Nevada

    Metro: Las Vegas-Paradise
    What a home will be worth in 2012: $184,917
    Q4 2008 price: $212,000
    Projected price change by MSA: -12.8%
    Projected price change by state: -15.0%

    Because of overdevelopment, Las Vegas-Paradise metro has been one of the worst-hit markets of the housing downturn. On top of a 33 percent drop in 2008, prices are expected to fall an additional 24 percent this year. (Tom Brakefield / Getty Images) Back to slideshow navigation
  5. California

    Metro: Los Angeles-Long Beach-Glendale
    What a home will be worth in 2012: $253,328
    Q4 2008 price: $350,000
    Projected price change by MSA: -27.6%
    Projected price change by state: -13.2%

    Los Angeles, best known as the home of Hollywood, is home to excellent universities such as the University of Southern California and large corporations such as aerospace contractor Northrop Grumman. Southern California has been particularly damaged by the downturn in the housing market and home values are expected to remain soft. (John Foxx / Getty Images / Stockbyte Silver) Back to slideshow navigation
  6. New York

    Metro: New York-White Plains-Wayne (N.Y.-N.J.)
    What a home will be worth in 2012: $343,937
    Q4 2008 price: $440,000
    Projected price change by MSA: -21.8%
    Projected price change by state: -15.6%

    One of the metros with the highest housing prices in the nation, the New York-White Plains-Wayne area is projected to have the third-largest drop in the country, behind Los Angeles and Tampa. Analysts predict that 2009 and 2010 will be the worst years, and then home prices will stabilize. Of particular concern is the impact that the crisis in the financial industry, one of the area's largest employers, has had on the housing market. From banker to back-office staff, thousands lost their jobs or saw their incomes slashed. As Wall Street strengthens, so will real estate prices. (Andy Sotiriou / Getty Images) Back to slideshow navigation
  7. Nebraska

    Metro: Omaha-Council Bluffs (Neb.-Iowa)
    What a home will be worth in 2012: $145,627
    Q4 2008 price: $138,000
    Projected price change by MSA: +5.5%
    Projected price change by state: +4.3%

    Omaha is home to its very own "sage," Warren Buffett. In addition to Berkshire Hathaway, the metro also serves as the headquarters for ConAgra, Union Pacific Corporation, Peter Kiewit & Sons, and Mutual of Omaha Companies. The Omaha area is predicted to do well over the next four years. The 5.5 percent projected price increase is the fifth-highest of the 50 metropolitan areas. (Getty Images) Back to slideshow navigation
  8. Washington

    Metro: Seattle-Bellevue-Everett
    What a home will be worth in 2012: $413,966
    Q4 2008 price: $395,000
    Projected price change by MSA: +4.8%
    Projected price change by state: +5.4%

    Relatively protected by the presence of tech giant Microsoft and airplane maker Boeing, after a nearly 10 percent drop in 2008, analysts project an 8.7 percent decrease this year, followed by gains. (Dan Callister / Newsmakers) Back to slideshow navigation
  9. Florida

    Metro: Tampa-St. Petersburg-Clearwater
    What a home will be worth in 2012: $119,348
    Q4 2008 price: $166,000
    Projected price change by MSA: -28.1%
    Projected price change by state: -30.9%

    The Tampa Bay area, on Florida's west coast, has seen its home prices fall dramatically and its unemployment rise. Like many Florida towns, the metro's economy depends on tourists continuing to visit its amusement parks, aquariums, and beaches. Florida, however, has been one of the biggest victims of the housing bust and won't see a meaningful rise in home values until 2012. (Paul J. Richards / AFP / Getty Images) Back to slideshow navigation
  10. Michigan

    Metro: Warren-Troy-Farmington Hills
    What a home will be worth in 2012: $157,469
    Q4 2008 price: $149,000
    Projected price change by MSA: +5.7%
    Projected price change by state: +2.0%

    The metro area includes some relatively affluent suburbs of Detroit, including Farmington Hills. Troy is a retail and business hub. And Warren is home to the General Motors Technical Center. The local real estate market has been brutalized by the woes of the auto industry. Home prices fell so far and so fast that they are expected to hit bottom in 2010 and then begin rising again. (Spencer Platt / Getty Images) Back to slideshow navigation
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updated 6/21/2009 12:23:33 PM ET 2009-06-21T16:23:33

Americans have not seen a boring housing market since the last millennium. You know — the average, ordinary kind of market where supply just about matches demand, prices are steady, and real estate ceases to be a topic of daily conversation. Instead, we've had six years of upside craziness followed by three years of downside terror. Now we're in a tug-of-war between those who think we've finally found a bottom and those who are convinced that the overhang of unsold homes is going to push prices considerably lower.

By 2012 we may finally get back to blissful boredom. With any luck, three years should be long enough for the U.S. economy to recover and for the nation's housing inventory to shrink to more normal levels. At that point, housing will return to its old ways, with prices governed not by national mood swings and global credit crises but by local issues ranging from zoning to immigration to job growth.

Prices? While they're likely to keep falling a while longer under the weight of foreclosures, the market is definitely closer to the bottom than the top. “We expect prices to drop for another year and then stabilize before starting to rise with incomes,” says Standard & Poor's chief economist David Wyss. Moody's Economy.com predicts the S&P/Case-Shiller U.S. National Home Price Index, maintained by data specialist Fiserv, will fall about 16 percent this year before regaining ground. Based on the National Association of Realtors national median home price of $180,000 for the fourth quarter of 2008, that would mean a median of $152,000 at the end of 2009 and then a rebound to $179,000 by the end of 2012.

All real estate is local
Of course, the national median price is an artificial construct, since there is no such place as National Median, U.S.A. Different trends can have a big impact on sales and prices across the U.S.

Local job growth is one of the most important factors to study when assessing a market's prospects. Omaha, for example, which has attracted employers such as Yahoo! and Google, missed out on the boom but is likewise dodging the bust. With the city adding jobs, the prospects for home prices look good. Detroit, where home prices fell by a third from 2003 through 2008, is likely to suffer even more in coming years as the auto sector continues to shrink. Demographic change, another trend examined here, is equally influential. For instance, Salt Lake City's youthful population is primed for house buying. While the bust left prices in once-bubbly Western markets such as Phoenix and Vegas lower in 2008 than in 2003, Salt Lake prices rose 51 percent over that period.

Other important factors are even more local than those, such as how far a house is from the nearest supermarket. You'll know we're back to an ordinary, boring real estate market when buyers focus less on the intricacies of foreclosures, short sales, and the like and go back to the things that used to matter most: What are the schools like? How quiet is the neighborhood? When am I going to have to replace that roof or cut down that diseased oak?

Sellers Mark and Maura Rampolla, who put their house in Oradell, N.J., on the market early this year, are coping with ultra-local issues such as their house being on a fairly busy road. They're also up against the national housing crisis angst. The Rampollas bought their house for $556,000 in 2004. Now they need to sell it because they're moving to the Los Angeles area to set up a West Coast distribution hub for their coconut-water sports-drink company, Zico. They listed the house for $599,000, which would represent a loss after factoring in closing costs and renovations. House hunters didn't even nibble on the property that the Rampollas and their two young daughters have grown to love. In mid-June the couple dropped the price to $559,000. “People say it's a beautiful house, but they're just very nervous right now,” says Maura.

The Rampollas will probably end up being the first owners to lose money on the Oradell home since it was built in 1925 — a phenomenon that's happening across the U.S. The classic American foursquare, with four bedrooms and original chestnut molding, was sold by the Bonavita family to the Riccio family for $47,000 in 1972, the first recorded transaction price. The Riccios made out by selling to the DeSouza family for $285,000 in 1997. The DeSouzas sold just seven years later to the Rampollas for $556,000. “We actually bought the house in a day,” laughs Maura. “Mark ran through the house in 10 minutes, I kid you not, because he had to get to a meeting in Queens. ... We had nothing to sell, and we just said: ‘Great!’ ”

The good news is that the Rampollas’ loss could wind up being some first-time home buyer’s gain. From now through 2012, lots of families that couldn't afford to buy when prices went through the roof will be able to get in on the ground floor. Based on today's household incomes and mortgage rates, the National Association of Realtors' Housing Affordability Index is bobbing around the highest level since recordkeeping began in 1970. “To generalize, yeah, it is a good time to buy a house. I don't think there's any urgency because I think it'll still be a great time to buy a house a year from now,” says economist Richard DeKaser of Woodley Park Research in Washington.

Homebuilders are helping by absorbing their share of the pain. In general, the U.S. needs about 1.5 million new homes a year to accommodate the growing population and the demolition of decayed properties. Builders exceeded that rate during the boom, but now they're building fewer than 500,000 homes per year. Their cutback should reduce the glut of homes and bring the market into better balance by 2012, if not sooner.

A still-murky picture
Most important, the economy should be growing briskly again by 2012, according to Moody's Economy.com. In May, the firm predicted gross domestic product would shrink 3 percent this year before growing 1.4 percent in 2010, 4.7 percent in 2011, and a robust 5.8 percent in 2012. It's also looking for home buying and building to return to their pre-bubble paces—no higher and no lower — by 2012.

Even if the economy performs as projected, there's still plenty that could go wrong in the housing market. Because conditions have been so unusual, “it's very hard for the model to extrapolate, based on past experiences, what's going to happen this time,” says Moody's Economy.com Senior Economist Celia Chen. In a study of global real estate markets, economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the University of Maryland found that home prices fall for an average of six years after a major financial crisis. That would put the U.S. bottom in 2012, or later.

Another risk is that potential buyers will stay out of the housing market, no longer trusting in home appreciation to do their saving for them. Writes David Rosenberg, the former Merrill Lynch economist who is now chief economist at Toronto-based asset management firm Gluskin Sheff & Associates: “Baby boomers are still in the discovery process on oversized real estate being more of a ball and chain than a viable retirement investment asset.” Rosenberg also is concerned that an aging population won't need the kind of big houses erected during the boom. “The high end of the market will be in a bear phase,” Rosenberg says in an interview.

So much has gone wrong with housing lately that it's easy to imagine worst-case scenarios. But in the more likely case, the market will fall some more, bounce off its lows, then gradually start growing. By 2012, families like the Rampollas may even get a warm, fuzzy feeling about homeownership again.

Copyright © 2012 Bloomberg L.P.All rights reserved.

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.94%
$30K home equity loan FICO 5.19%
$75K home equity loan FICO 4.58%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.40%
13.40%
Cash Back Cards 17.92%
17.91%
Rewards Cards 17.12%
17.11%
Source: Bankrate.com