While the Bay Area housing market has had its ups and downs much of this year, several segments of the market remained resilient through much of 2011.

According to DataQuick, real estate investors for the most part - bought one out of every five single-family homes and condos in 2011. Buyers paying cash accounted for more than a quarter of sales. Short sales - those transactions where a home sells for less than the homeowner owes on the mortgage - added up to another 20 percent of sales. Finally, the move up buyer was back. While no statistics are available for this market segment, we witnessed this resurgence first hand.

Today's market is extremely attractive to investors. Record low mortgage interest rates, coupled with very favorable asking prices for distressed properties and other entry level homes, mean that rental income can easily cover the expenses for a new landlord owner. Given the volatility in the stock market, real estate is looking like a better and better alternative.

We think real estate investors are playing an important role in our market. When they buy, they often upgrade properties that in many cases are badly in need of maintenance. They're helping to clear out the supply of vacant, bank-owned properties that can be blight on neighborhoods. And in general, they're reducing the huge inventory of distressed properties that serve to keep all home prices down.

Unlike past investors, many new landlords are generally not expecting to quickly flip a home for a profit. Many are seeking reasonable returns by simply owning and managing rental properties which are experiencing rising rents.

It's important to remember that most housing recoveries are preceded by a rise in rental housing rates. This has two effects, both positive for our housing recovery. The rise in rents attracts more investors as purchasers which crimps supply and it causes more renters who qualify for homeownership to consider a purchase, especially with today's interest rates.

The other good news is that move up buyers are back! They want to "buy the deal" and many are willing to wait out a short sale escrow to get a good value. Short sales no longer carry the stigma they once did. While still the exception, they are an attractive option for today's buyer.

Current market inventory is about 20% less than this time last year. We hope that we're at an inflection point and prices start to turn around next year. At the very least, if inventory is kept under control this will set the stage for future price appreciation. Remember, volume precedes price in real estate cycles.

Next year should be a better year for sellers than 2011. The South Bay led the Nation in job growth over the last year. According to the Stockton based Business Forecasting Center at the University of the Pacific, South Bay job growth should produce a ripple effect for the nine-county Bay Area region. As we approach a New Year we are expecting more and more of the same types of buyers but within an improving real estate market. Demand has returned to the market place and it looks like it will continue!

Kathleen & Larry