The housing market has been sending some serious mixed signals for months now.  The one certainty is that the real estate market is in flux, and will likely be for months to come. 

FIRST, THE GOOD NEWS:

• Although interest rates have been increasing, they remain at historical lows.  This is good news for buyers who act quickly, as none of the experts expect rates to remain this low later in 2010.
• The $8000 tax credit for first time buyers was expanded to include existing home owners, as well.  The timing of this offer is crucial.  Buyers must close on or before June of 2010 to collect their free cash.
• Home prices and demand have steadily increased month over month throughout October of 2009. 
• Although some markets may slide a bit further, we are definitely in the last innings of the crash.  Even if we have a bit more downward pressure, 2010 will be the bottom of the housing crash.
• Home seller’s who use the power of the MLS and the Internet to realistically market their properties, will see more buyers and will have much more pricing power than they’ve experienced in years.
• In markets, such as Phoenix, you can buy a new home for $800 a month, making it cheaper to own a home than rent it.

THE BAD NEWS:

• According to Bob Curran, director at Fitch Ratings, a mountain of foreclosures will hit the market in 2010.  And, a 10.5 percent unemployment rate will cause a surge in new homeowners that will fall into default.
• Per Lawrence Yun, chief economists with the National Association of Realtors (NAR) expects a record 3 million foreclosures in 2010, up from 2.1 million in 2009.
• John Burns, president of John Burns Real Estate Consulting, is even more bearish.  He thinks 50 percent more people will lose their homes to the bank than they did last year.  Why?  Lenders were under pressure to postpone foreclosures in favor of loan modifications.  And, the banks weren’t staffed to handle all the defaulted loans, as they now are.
• The Office of Comptroller of the Currency and the Office of Thrift Supervison released  a report that said the results of the loan modification program was disappointing.  61 percent of the loans that were modified are now in default again.  The offices predict another wave of foreclosures in 2010, which could cause prices to fall another 5 – 10 percent before the market stablilizes.
• The Federal Reserve plans to end the program that has kept mortgage rates so low for so long.  Rates have already passed the 5 percent mark in anticipation.
• The first time buyer and existing home buyer tax credit program expires in early 2010.  To qualify for the stimulus, buyers must purchase by April and close no later than June of 2010.  This program has certainly lured buyers into the market place and its expiration will take a toll on demand in the 3rd and 4th quarters.

InfoTube Prediction:  Since the housing market peak in the summer of 2006, home prices have dropped over 30 percent on average.  Prices in some markets such as Las Vegas, Phoenix and parts of Florida and California have fallen more than 60 percent.   Some markets have further to go, but we are in the final innings of the crash.  Even if we go lower, we will see the bottom in 2010.  But, don’t look for a rebound off the bottom.  The damage was too deep and too systemic for a “V” shape recovery.  The housing market will skate along the bottom for quite a while and it will probably be 2013 before most people notice any rebound.

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