As we reached the end of 2009, we were beginning to see a flicker of light at the end of the tunnel as home sales advanced hitting its hottest levels in more than two years. Many felt that we have touched the floor in home prices with increased demand from home purchasers sparking fierce bidding activity from Florida to Nevada, Silicon Valley and New York.
He foresees that home costs may fall another 5 p.c to ten percent in 2010 with some severe reduction of 30 p.c in places like Miami. There is a small probability that home prices may recover in 2011 and it’s still too early to say. Zandi is concerned with the millions of loans that don’t get modified. They will pile up and add more to foreclosures. RealtyTrac estimates that 2,000,000 housing units in the United States are in foreclosure or bank owned. It is troubling thought that many more may add on to the inventory. Zandi is predicting 2.4 million new foreclosures in 2010. He foresees banks taking an active role in listing more of their properties in the 1st part of the year. The bank’s actions of listing more properties in the market will cause prices to falter even more.
Presently, the U.S. housing market is not holding on its own as it is being perked up by the extended first-time-home-buyer tax credit. In addition, the U.S government has been purchasing mortgage-backed-securities or the bundling of home loans since late 2008. The govt. purchases of these instruments have helped keep mortgage rates low and fascinating. Wall St. investors once popularly bought MBS in the hope of earning a good return. This is obviously not true today with the decline of US housing causing the market interest for mortgage-backed stocks to shrink with no investors or speculators. By March of 2010, the US govt. would have finished its acquisition of a huge $1.25 trillion worth of mortgage-backed-securities. There’s debate that the government may end its purchases of mortgage-backed-securities by March 2010. This may lead to mortgage rates to spike by a full point. This can turn away many home purchasers as it raises the price of purchasing a home.
All of these considerations were integrated into Economy.com’s housing price forecast for 2010 with regards to local figures for income, population, interest rates and foreclosures. Their 2009 projection of a 14.5% price correction were quite spot on and not far from the reported 13.2%. According to Zandi, the worst hit areas such as Nevada, Florida, Arizona and California will have more foreclosures. He indicated Miami was the worst market where the 2009 median home cost of $183,530 is forecast to fall another 33% in 2010.
Zandi indicates the less debatable areas like the Pacific Northwest, New York and Virginia where home costs are pricey compared to rents. The better performing regions are found in the pockets of the Midwest where the rural and energy economies are stronger in places like Dakota, Kansas and Nebraska. Pittsburgh which never had a housing bubble is the sole home market that’s anticipated to climb by 0.41% in 2010.
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