You and 2010: Terrible time to sell may be right time to buy

        One thing you can bet on at the end of every year is that the prognosticators will come out of the woodwork.  And many of us will take those predictions as a hint that it might be time to sell or buy a home, or both.  With the explosive growth of the blogosphere and the fundamental importance of the housing market to the overall economy, there is no shortage of predictions online about where the market is headed in 2010.  And most of those predictions are not too rosy…

 

John Mulkey, who goes by the handle “Housing Guru,” has been studying his local Georgia and national real estate markets for three decades.  He predicts that home prices will stabilize in some areas but that continuing

foreclosures and short sales will account for 40% of all sales over the next 30 – 36 months and cause continuing declines in many areas “for another 2 – 4 years.”  He does not see prices returning to 05/06 levels for at least another decade.  Although Mulkey believes that to ensure continuing economic recovery, the Federal Reserve will not raise interest rates in the near-term, he does believe that inflation poses such a threat that there will be little choice but for interest rates to rise by 2012.  That will have a negative affect on home sales in succeeding years.  Finally, the Guru anticipates a chaotic year in politics –- we agree with the inevitability of that prediction –- in which continuing partisanship will further unsettle the housing market and economy in general.  “There’s little remaining in their [politicians’] arsenal that can have a significant impact” on the economy,” Mulkey concludes. The full text of his comments can be found by clicking here.

 

CNBC real estate reporter Diana Olick at CNBC did a nice job of predicting housing market moves in 2009.  Her predictions for 2010 include a dip for the residential housing market at mid-year before a recovery later in the year; a foreclosure rate higher than many others are predicting; and a rise in mortgage interest rates to about 6%.  The rising foreclosure rates, Ms. Olick surmises, will push additional inventory into the market and cause continuing pressure on prices.  Her full prediction is here. 

 

Fiserv, a global financial services technology company, recently published its annual analysis of home price trends in more than 375 U.S. markets. It is based substantially on the respected Case-Shiller® Home Price Index, which Fiserv owns.  “Large supplies of foreclosed properties and extremely weak job markets will continue to put downward pressure on home prices,” said David Stiff, Fiserv’s chief economist.  “Many temporary factors that were partly responsible for strong spring and summer real estate markets, including the first-time homebuyer tax credit and Federal Reserve actions to drive down mortgage interest rates, will no longer be bolstering demand.  Consequently, home prices will resume falling again before they stabilize...”  The Fiserv press release about 2010, which is available here, says its data predict a further home price decline in Orlando, FL, of 27% after a similar decline in 2009.  Other Florida, California and Arizona markets, whose price declines are as much as 60% from peak, are expected to continue to slide next year.

 

        The irony of this market is that there has probably never been a worse time to sell a home…or a better time to buy.  As we have written here many times, the natural instinct of those who want to sell their homes and move elsewhere is to wait until the market rebounds.  That strategy may be necessary for those who have little or no equity in their primary homes.  But for others who bought in the 1990s and saw wild appreciations in value during the early years of their ownership and have a nice bit of equity, waiting to move, especially to a lower-cost region, may be unwise from a financial standpoint. (We recognize that all circumstances are different, and money is not everything.)

        Properties in growing markets, such as many towns in the southern U.S., will appreciate faster than most in the north; those who wait could lose buying buyer, in some cases substantial buying power.  Eventually, the costs to get your home ready for sale a few years from now will grow (think roof, heating and cooling systems, cosmetics), further biting into your buying power.  And consider the difference in the costs of living where you live now and where you might want to live.  They could be substantial.

        For some of us, this could be the year to get a move on.