This is a great story about home prices...It's just a indication that we're not nearly at the bottom but this year we will see some areas gain price stabilation...but the reality is that prices will go down to "trump levels..i.e. circl 2000" before it's over....anyway here's the story and if you want to comment here or call me 818 4220 2040/Keller Williams CA Lic # 018108335
These metros saw their price tags drop most in the last three months.
If you've been holding your breath for that home-price upswing that the more optimistic forecasters predicted last year, you're out of luck. The real estate slide--though it's now a mild one as opposed to the double-digit drops of 2008--isn't going to abate soon. Home prices are dipping nationwide, down 1.4% by one measure, and will inch perilously close to their January 2009 bottom, according to a new report from Altos Research, a Mountain View, Calif.-based research firm.
In Depth: Cities With The Fastest Falling Home Prices
Some metros have it worse than others. San Diego has seen the greatest three-month drop in asking prices of the 27 markets Altos tracks, falling 7.3% between October and December 2009. In that city, volatility is the name of the game. Prices drifted upward for the first half of 2009, prodded by new sellers who were encouraged by modest bumps in pricing. But when fall's seasonal slump hit, the trend reversed dramatically.
Although home prices are always weakest in the fall--they typically peak in the spring and hold steady through the summer--Altos' numbers reflect an unsteady market in general. Its 10-city composite, which it uses as a proxy for the national market, shows a 1.4% drop since October. When stimulus measures like the first-time homebuyer tax credit (which expires in June) and historically low interest rates abate, the market could continue to suffer.
"The combination of an expired tax credit and rising interest rates would be a catalyst for re-testing the [January 2009] bottom," says Mike Simonsen, CEO of Altos.
Behind the Numbers
For our list of cities with the fastest-falling home prices, we used Altos Research's January market update, which looks at asking prices, inventory and days on the market single-family homes--but not condominiums--in 27 of the country's closely watched real estate markets. It uses homes for sale in each city's Metropolitan Statistical Area--a census-defined area that the federal government uses to collect statistics--for its data.
Charlotte, N.C., the city with third-greatest drop in asking prices (falling 4.4% to a median price of $248,543 in December), suffered from exuberant pricing early in the year. But the Wall Street collapse hit Charlotte hard, as it's a financial hub that is headquarters to Bank of America Corp. ( BAC - news - people ), among other major banking institutions. Now the area's housing market is suffering.
"In Charlotte, at the beginning of the year, new sellers thought they would get a nice premium, and they were pricing above the median price," says Scott Sambucci, vice president of data analytics at Altos Research. "They were reading all those articles about the national housing market saying, 'That's not happening here.' But there was a lag effect."
Miami is the only city of the 27 markets Altos tracks that saw asking prices rise over the last three months. Prices there were up 2% from October to a median price of $494,992. The reasons for this are mixed: While the numbers are somewhat promising, Miami's good fortune is also a reflection of just how long it took for the hard-hit Florida housing market to regain its footing. And even with the recent upturn, it's the city where homes sit on the market for the longest by far. Homes here stay for sale for a median of eight months. Not to mention Altos' analysis only reflects single-family homes--not condominiums, a section of the Miami's real estate market that has yet to stabilize.
Therefore, Miami's upswing should be taken skeptically, says Simonsen. "Miami lagged behind everything else, and so is only now starting to feel the impact of the stimulus."
But a decision on Jan. 7 by mortgage entities Fannie Mae and Freddie Mac to begin backing some Miami condominium loans that they previously hadn't touched might help rejuvenate sales.
Big Apple Trouble
Most markets have seen price drops of less than 3%, and that's true for New York City, where home prices have fallen by 2.3%, to a median of $638,082. But there may be trouble in store for the Big Apple, which peaked late and whose real estate market was more directly affected by the Wall Street implosion of late 2008. Its inventory of listed homes has increased by 4.2% since October. Phoenix is the only other market that saw inventory rates rise during a seasonally slow season in which it typically falls. Slimming down inventory is necessary to curb price declines.
In New York, onerous real estate laws mean that foreclosures take roughly six months to complete, and post-foreclosure sales don't usually close for another four months after that. This has kept buyers away, and hamstrung real estate recovery in the area.
"In states with complex foreclosure laws, the recovery is clearly being delayed," says Simonsen. "For example, there are investment funds that will buy in Texas and California, but won't buy in New York because it takes so long to foreclose--and then you have to go to court."
New York prices likely have much farther to fall.
Although the rate of decline has mellowed from stomach-turning to gentle nationwide, these numbers show that any jubilation over a recovered real estate market would be premature.
Top 5 Cities With The Fastest-Falling Home Prices
1. San Diego-Carlsbad-San Marcos, Calif.
2. Salt Lake City, Ut.
3. Charlotte-Gastonia-Concord, N.C.-S.C.
4. Denver-Aurora, Co.
5. Portland-Vancouver-Beaverton, Or.-Wa.
Click here for the full list of Cities With The Fastest-Falling Home Prices
Thursday, January 28, 2010
Tuesday, January 26, 2010
Have you thought about a Green Home?
Energy-efficient homes: Cheaper to own, more expenive to buy. Why?
By Douglas Fischer
Posted Mon Jan 25, 2010 7:13am PST
Related topics: Buildings, Heating-Cooling, House, Saving energy at home More from The Daily Green News blog .
3
votes
Buzz up!
EAST LANSING, Mich. -- Krista and Micah Fuerst were looking near here to buy their first place together, and had narrowed it down to two houses: One built 25 years ago, the other brand new and built to strict energy efficiency standards. The couple's choice was easy: They picked the Energy Star home, which the U.S. had certified because it will use about one-fifth to one-third less energy than a comparable home.
But they're in the minority. Most homebuyers don't think about the ongoing costs of home ownership beyond the mortgage and taxes; using energy costs, too. And fewer still think about the pollution that energy use creates, but home energy use accounts for 16 percent of U.S. greenhouse gas emissions. The proportion of newly built Energy Star homes is growing, but still only represents 20 percent of new homes built in 2009, according to Sam Rashkin, national director of the Home Energy Star program.
Despite the slow increase in newly built efficient homes, some 99 percent of existing houses are "sick" -- damp, drafty, dusty, noisy and expensive to heat and cool. They "could be made at least 30 percent more energy-efficient with highly cost-effective, tried-and-true energy-efficiency improvements," according to Rashkin. A 30% reduction in energy use is a 30% reduction in home energy costs; newly built Energy Star homes have, since 1995, saved homeowners an estimated $1.2 billion.
The Energy Star program won't fix those old houses. Energy Star designations go to the cream of the housing stock; if just one in five new homes meets these standards, far fewer renovations do. So if energy efficient homes cost homeowners less and pollute less, why aren't they more commonplace? Experts say economics and regulations are the root of the problem: Mortgages are structured in ways that fail to recognize the benefits of energy efficiency, while a patchwork of inconsistent and ill-enforced energy codes provides conflicting signals to industry.
Meanwhile consumers remain largely unaware of efficiency's advantages, advocates say, thereby bypassing an easy target for considerable cuts in national carbon emissions -- and home energy bills.
In this sense the Fuersts are typical of many homebuyers. Both in their late twenties, the Fuersts were aware of Energy Star-rated appliances, but didn't know the label also applied to homes, said Krista Fuerst, a childcare director. Their home, which wouldn't stand out in any new subdivision, and they mostly just wanted a place big enough to raise a family. They traded slightly longer commutes for smaller energy bills and freedom from costly renovations.
"We're certainly conscious of the environment," she explained, "but we're not hyper-conscious. We're not extreme green."
Of course, the ultra-efficient heating and cooling systems, high-performance windows and other features that make the homes exceptionally comfortable also make them a bit pricier. The added cost for a new Energy Star home may only be about the price of a night at the movies on each month's mortgage payment, but it's enough to scare off many potential buyers.
"It's an incredibly smart choice," Rashkin said, since smaller utility bills more than offset the higher price. "But consumers are overwhelmed by first cost."
Energy-efficient mortgages
To get buyers over that hump, a handful of specialized mortgage options have for decades given buyers more cash up front, since they'll save on energy costs. But nobody's buying. Before the mortgage crisis, when loans were easier to come by and energy was relatively cheap, energy-efficient mortgages weren't very enticing, experts say, and lenders didn't bother with them. Now the specialized options are more valuable, but lenders have grown accustomed to ignoring them.
"It's really unfortunate," said Jennifer Amann, buildings program director for the American Council for an Energy-Efficient Economy. "Energy-efficient mortgages have been available now for 20 years or so, but they're a really underutilized tool."
While energy-efficient mortgages are a good idea, there's a more obvious solution, according to Cliff Majersik, executive director of the Institute for Market Transformation, which advocates for energy efficiency: Make all mortgages – not just specialized ones – account for energy use.
"The fact is that energy-efficient homes have much lower foreclosure and delinquency rates. So that's a market failure, that we're not giving homeowners credit for buying good, efficient homes," Majersik said. "The challenge is that there are processes that have been in place for a long time, and there's pretty clear evidence that they've let us down."
The House climate bill includes a handful of provisions that would reward buyers of efficient homes. For example, the Federal Housing Administration would be required to insure at least 50,000 energy-efficient mortgages over three years, and Fannie Mae and Freddie Mac would make the kind of wholesale changes to underwriting guidelines sought by Rashkin, Majersik and others. Another provision would enforce a national building code that would improve efficiency on new buildings by 30% immediately, and 70% by 2029. Currently, states can adopt any building codes they want, so requirements vary widely.
Homebuilders say they'll build more efficient homes when buyers ask for them, but demand won't grow until more people understand the benefits of efficiency. Many who have lived in energy efficient homes are convinced.
"The house is heated very evenly," Krista Fuerst explained. "There are no cold spots and no drafts." They set the thermostat at 67 degrees -- much lower than would have been comfortable in their rental -- and turn it down to 57 when they leave in the morning, but the temperature never drops that low, even after 12-hour days. So far their heating bills have been just over half what they paid last winter. "Now that we have lived in an energy-efficient house," she said, "it would be very difficult to go back."
Douglas Fischer is editor of Daily Climate, one of The Daily Green's trusted sources of information. This post is republished with permission.
By Douglas Fischer
Posted Mon Jan 25, 2010 7:13am PST
Related topics: Buildings, Heating-Cooling, House, Saving energy at home More from The Daily Green News blog .
3
votes
Buzz up!
EAST LANSING, Mich. -- Krista and Micah Fuerst were looking near here to buy their first place together, and had narrowed it down to two houses: One built 25 years ago, the other brand new and built to strict energy efficiency standards. The couple's choice was easy: They picked the Energy Star home, which the U.S. had certified because it will use about one-fifth to one-third less energy than a comparable home.
But they're in the minority. Most homebuyers don't think about the ongoing costs of home ownership beyond the mortgage and taxes; using energy costs, too. And fewer still think about the pollution that energy use creates, but home energy use accounts for 16 percent of U.S. greenhouse gas emissions. The proportion of newly built Energy Star homes is growing, but still only represents 20 percent of new homes built in 2009, according to Sam Rashkin, national director of the Home Energy Star program.
Despite the slow increase in newly built efficient homes, some 99 percent of existing houses are "sick" -- damp, drafty, dusty, noisy and expensive to heat and cool. They "could be made at least 30 percent more energy-efficient with highly cost-effective, tried-and-true energy-efficiency improvements," according to Rashkin. A 30% reduction in energy use is a 30% reduction in home energy costs; newly built Energy Star homes have, since 1995, saved homeowners an estimated $1.2 billion.
The Energy Star program won't fix those old houses. Energy Star designations go to the cream of the housing stock; if just one in five new homes meets these standards, far fewer renovations do. So if energy efficient homes cost homeowners less and pollute less, why aren't they more commonplace? Experts say economics and regulations are the root of the problem: Mortgages are structured in ways that fail to recognize the benefits of energy efficiency, while a patchwork of inconsistent and ill-enforced energy codes provides conflicting signals to industry.
Meanwhile consumers remain largely unaware of efficiency's advantages, advocates say, thereby bypassing an easy target for considerable cuts in national carbon emissions -- and home energy bills.
In this sense the Fuersts are typical of many homebuyers. Both in their late twenties, the Fuersts were aware of Energy Star-rated appliances, but didn't know the label also applied to homes, said Krista Fuerst, a childcare director. Their home, which wouldn't stand out in any new subdivision, and they mostly just wanted a place big enough to raise a family. They traded slightly longer commutes for smaller energy bills and freedom from costly renovations.
"We're certainly conscious of the environment," she explained, "but we're not hyper-conscious. We're not extreme green."
Of course, the ultra-efficient heating and cooling systems, high-performance windows and other features that make the homes exceptionally comfortable also make them a bit pricier. The added cost for a new Energy Star home may only be about the price of a night at the movies on each month's mortgage payment, but it's enough to scare off many potential buyers.
"It's an incredibly smart choice," Rashkin said, since smaller utility bills more than offset the higher price. "But consumers are overwhelmed by first cost."
Energy-efficient mortgages
To get buyers over that hump, a handful of specialized mortgage options have for decades given buyers more cash up front, since they'll save on energy costs. But nobody's buying. Before the mortgage crisis, when loans were easier to come by and energy was relatively cheap, energy-efficient mortgages weren't very enticing, experts say, and lenders didn't bother with them. Now the specialized options are more valuable, but lenders have grown accustomed to ignoring them.
"It's really unfortunate," said Jennifer Amann, buildings program director for the American Council for an Energy-Efficient Economy. "Energy-efficient mortgages have been available now for 20 years or so, but they're a really underutilized tool."
While energy-efficient mortgages are a good idea, there's a more obvious solution, according to Cliff Majersik, executive director of the Institute for Market Transformation, which advocates for energy efficiency: Make all mortgages – not just specialized ones – account for energy use.
"The fact is that energy-efficient homes have much lower foreclosure and delinquency rates. So that's a market failure, that we're not giving homeowners credit for buying good, efficient homes," Majersik said. "The challenge is that there are processes that have been in place for a long time, and there's pretty clear evidence that they've let us down."
The House climate bill includes a handful of provisions that would reward buyers of efficient homes. For example, the Federal Housing Administration would be required to insure at least 50,000 energy-efficient mortgages over three years, and Fannie Mae and Freddie Mac would make the kind of wholesale changes to underwriting guidelines sought by Rashkin, Majersik and others. Another provision would enforce a national building code that would improve efficiency on new buildings by 30% immediately, and 70% by 2029. Currently, states can adopt any building codes they want, so requirements vary widely.
Homebuilders say they'll build more efficient homes when buyers ask for them, but demand won't grow until more people understand the benefits of efficiency. Many who have lived in energy efficient homes are convinced.
"The house is heated very evenly," Krista Fuerst explained. "There are no cold spots and no drafts." They set the thermostat at 67 degrees -- much lower than would have been comfortable in their rental -- and turn it down to 57 when they leave in the morning, but the temperature never drops that low, even after 12-hour days. So far their heating bills have been just over half what they paid last winter. "Now that we have lived in an energy-efficient house," she said, "it would be very difficult to go back."
Douglas Fischer is editor of Daily Climate, one of The Daily Green's trusted sources of information. This post is republished with permission.
Sunday, January 3, 2010
HERE's the truth about Home Buying in 2010!!!
10 Things to Know About Real Estate in 2010
by Luke Mullins
Tuesday, December 29, 2009
provided by
Is 2010 the year to buy a house? It certainly looks that way: After a steep run-up in prices during the first half of the decade, home values have plummeted back to 2003 levels. Fixed mortgage rates are sitting near record lows. And the foreclosure epidemic--while painful for many home owners--has created some wonderful opportunities for bargain hunters. If that's not enough, Uncle Sam is handing out thousands of dollars in tax credits to nearly all first-time buyers and the bulk of existing home owners who close a purchase by June.
But while the 2010 outlook appears inviting, there's one key catch. "You need to have a stable job," says Mark Zandi, the chief economist of Moody's Economy.com. The economy is showing signs of life, but the unemployment rate is already at 10 percent and expected to go higher. And while those mortgage rates are attractive, buying a house makes sense only if you can bank on your income stream. So before you consider purchasing a home, take a hard look at your job, your company, and your industry.
That said, here are 10 things to know about real estate in 2010:
1. Prices to bottom: After more than three years of falling, real estate values have shown signs of stabilization in recent months. At the national level, home prices slid nearly 9 percent between the third quarter of 2008 and the same period this year, according to the S&P/Case-Shiller home price report. That's a notable improvement from the second quarter's nearly 15 percent annual drop and the first quarter's 19 percent decline. This improvement will give way to a bottom in home prices--finally!--in 2010, but not before additional declines, Zandi says. Zandi projects home prices will hit bottom in the third quarter of 2010 after logging a peak-to-trough decline of roughly 37 percent, based on the S&P/Case-Shiller national home price index. "That means we've got another roughly 10 percent [decline] to go," Zandi says.
2. Mortgage delinquencies up: Amid falling home prices and a nasty labor market, roughly 1 in every 7 mortgages was either past due or in foreclosure by the end of the third quarter--the highest delinquency rate in the 37-year history of the Mortgage Bankers Association's National Delinquency Survey. Two factors are expected to drive delinquencies even higher next year. First, nearly 1 in 4 homeowners currently owes more on their mortgage than the property is worth, which increases their odds of default. And secondly, the national unemployment rate--which already stands at 10 percent--will peak at about 10.5 percent in the first quarter of 2010, says Patrick Newport, an economist at IHS Global Insight. Additional job losses mean more borrowers won't be able to pay their mortgage bills. "The [delinquency] rate is going to stay up there for quite a while because the job market is going to be really weak for a while," Newport says.
3. Foreclosures move upstream: The number of foreclosure sales will increase to about 1.9 million in 2010, according to Moody's Economy.com. And while we've already seen a growing number of more expensive homes heading into foreclosure, Heather Fernandez, vice president of marketing at the real estate search engine Trulia, expects the trend to pick up steam next year. (Trulia is a U.S. News partner.) "We are poised in 2010 to see a surge of foreclosures from prime borrowers. Hundreds of billions of dollars in option [adjustable rate] mortgages are set to be recast" next year, Fernandez says. Option adjustable rate mortgages allow borrowers to make lower monthly payments for an initial period, after which the payments adjust--or "recast"--higher. For some borrowers, the new payments can be more than twice their initial payments. Combined with other factors, like the loss of a job, a recasting option adjustable rate mortgage can make borrowers more likely to default. "These are [properties] at higher price points [and] potentially in more desirable neighborhoods," Fernandez says.
4. Mortgage rates to rise: Anyone who purchased a home in 2009 was presented with some extremely attractive mortgage rates. Rates on 30-year, fixed mortgages fell to an average of 4.88 percent in November, down sharply from 6.09 a year earlier. A key factor behind the plunge was a Federal Reserve program, first announced in November of 2008, that purchased debt and mortgage-backed securities from Fannie Mae and Freddie Mac. But the program is slated to expire at the end of the first quarter, and if private investors don't step up, fixed mortgage rates could jump. (The Fed, of course, could always decide to extend the program.) The unwinding of this Fed program, the improving economy, and mounting concern over government deficits could push rates on 30-year, fixed mortgages to roughly 5.5 percent by mid-2010 and close to 6 percent by the end of the year, says Mike Larson of Weiss Research. "Almost all signs to me point higher," Larson says.
5. Buyer's market remains: With prices still falling, mortgage rates remaining historically attractive, and additional homes hitting the market in the form of foreclosures, the dynamics of the real estate market will continue to favor buyers over sellers in 2010. That means those looking to buy a home next year should not feel pressured to act impulsively. "You don't need to have a sense of urgency, but understand that as time progresses the balance of power as we get into 2010 is going to slowly but surely shift away from [buyers]," Larson says. "It is not going to be a strong seller's market, but it will be more evenly distributed as the year goes on." Data from the real estate firm Zillow show that home buyers are already losing the leverage they once enjoyed. While home buyers landed a median discount of 4.6 percent off listing prices in January, the size of the gap fell to 2.7 percent by October. Expect this gap to close further as 2010 marches on.
6. Modification plan could be modified: While the Obama administration has put nearly 700,000 borrowers into temporarily restructured mortgages, it had found permanent fixes for just 31,382 struggling homeowners through November. What's more, critics have identified two key shortcomings of the government's $75 billion antiforeclosure plan. First, the program isn't much help for borrowers struggling to stay in their homes as the result of a job loss. And the rickety labor market is a key factor behind rising delinquencies. At the same time, the plan does not sufficiently address the issue of negative equity--owing more on your home loan than the property is worth--which also works to increase foreclosures. "The current modification program does not address negative equity and is therefore destined to fail," Laurie Goodman, a senior managing director at Amherst Securities Group, told a congressional committee in written testimony on December 8. "It must be amended to explicitly address this problem." Zandi says the government may move next year to overhaul the modification program in two ways: improving troubled borrowers' negative equity positions by writing down some of the mortgage principal, and helping to turn troubled homeowners into renters.
7. FHA lending standards may increase: While banks have jacked up lending standards in the face of mounting delinquencies, mortgages backed by the Federal Housing Administration--which come with a minimum down payment of just 3.5 percent--have remained accessible to a wide swath of borrowers. The FHA guarantees nearly 30 percent of new-home purchase mortgages today, up sharply from just 3 percent in 2006. But the rapid growth has occurred alongside an increase in mortgage delinquencies. As a result, the FHA's reserves have dipped below congressionally mandated levels. The development has put pressure on the Obama administration to beef up its requirements for agency-backed home loans. In early December, the Department of Housing and Urban Development announced that it would make several changes to FHA mortgage requirements: raising up-front cash requirements, boosting minimum credit scores, and perhaps charging more for insurance premiums. Additional new restrictions may be in store. Taken together, the developments could work to choke off the supply of mortgage credit to borrowers who can't get financing elsewhere.
8. Tax credit available through June: On top of lower prices and cheap mortgage rates, Uncle Sam is offering an additional incentive to get buyers into the market next year. In early November, President Obama signed a bill extending and expanding a popular tax perk for home buyers. The legislation gives qualified first-time home buyers a tax credit of up to $8,000 if they close the purchase of a primary residence by the end of June. Meanwhile, qualified current home owners are eligible for a credit of up to $6,500 when they buy their next principal residence. But while the tax perk may make a home purchase more tempting, would-be buyers should make sure they have the job security and financial wherewithal to handle the transaction before going ahead. "Don't let [the home buyer tax credit] be the thing that drives you to act," Larson says.
9. Markets will vary a great deal by region: The performance of the national housing market is much less important that the dynamics of your local market, and sales and pricing trends will vary a great deal from one area to the next in 2010. "There will be geographic pockets where the values will still continue to decline, and there will be geographic pockets where they increase," said Dale Siegel, a mortgage broker and the author of The New Rules for Mortgages. That means anyone interested in buying real estate next year can't just read the national headlines. Instead, find a good blog that covers the local housing market and consider speaking with a real estate agent with experience in the area. Check out online listings--pay close attention to pricing and inventory trends. And make sure to head out to open houses to get a firsthand feel for the market.
10. Mobile maps can help: Advances in technology have enabled would-be home buyers to increase the efficiency of their searches. For example, Zillow's iPhone app allows home buyers to see the estimated values and listed prices of the properties they pass on the street. The app, which is free, has been downloaded more than 830,000 times. Trulia has unveiled a similar product that allows users to find nearby open houses as well. "If you are sitting in a neighborhood having brunch on a Sunday, you can very easily pull up your phone [and] walk into open houses," says Trulia's Fernandez.
Copyrighted, U.S.News & World Report, L.P. All rights reserved.ADVERTISEMENT
--------------------------------------------------------------------------------
by Luke Mullins
Tuesday, December 29, 2009
provided by
Is 2010 the year to buy a house? It certainly looks that way: After a steep run-up in prices during the first half of the decade, home values have plummeted back to 2003 levels. Fixed mortgage rates are sitting near record lows. And the foreclosure epidemic--while painful for many home owners--has created some wonderful opportunities for bargain hunters. If that's not enough, Uncle Sam is handing out thousands of dollars in tax credits to nearly all first-time buyers and the bulk of existing home owners who close a purchase by June.
But while the 2010 outlook appears inviting, there's one key catch. "You need to have a stable job," says Mark Zandi, the chief economist of Moody's Economy.com. The economy is showing signs of life, but the unemployment rate is already at 10 percent and expected to go higher. And while those mortgage rates are attractive, buying a house makes sense only if you can bank on your income stream. So before you consider purchasing a home, take a hard look at your job, your company, and your industry.
That said, here are 10 things to know about real estate in 2010:
1. Prices to bottom: After more than three years of falling, real estate values have shown signs of stabilization in recent months. At the national level, home prices slid nearly 9 percent between the third quarter of 2008 and the same period this year, according to the S&P/Case-Shiller home price report. That's a notable improvement from the second quarter's nearly 15 percent annual drop and the first quarter's 19 percent decline. This improvement will give way to a bottom in home prices--finally!--in 2010, but not before additional declines, Zandi says. Zandi projects home prices will hit bottom in the third quarter of 2010 after logging a peak-to-trough decline of roughly 37 percent, based on the S&P/Case-Shiller national home price index. "That means we've got another roughly 10 percent [decline] to go," Zandi says.
2. Mortgage delinquencies up: Amid falling home prices and a nasty labor market, roughly 1 in every 7 mortgages was either past due or in foreclosure by the end of the third quarter--the highest delinquency rate in the 37-year history of the Mortgage Bankers Association's National Delinquency Survey. Two factors are expected to drive delinquencies even higher next year. First, nearly 1 in 4 homeowners currently owes more on their mortgage than the property is worth, which increases their odds of default. And secondly, the national unemployment rate--which already stands at 10 percent--will peak at about 10.5 percent in the first quarter of 2010, says Patrick Newport, an economist at IHS Global Insight. Additional job losses mean more borrowers won't be able to pay their mortgage bills. "The [delinquency] rate is going to stay up there for quite a while because the job market is going to be really weak for a while," Newport says.
3. Foreclosures move upstream: The number of foreclosure sales will increase to about 1.9 million in 2010, according to Moody's Economy.com. And while we've already seen a growing number of more expensive homes heading into foreclosure, Heather Fernandez, vice president of marketing at the real estate search engine Trulia, expects the trend to pick up steam next year. (Trulia is a U.S. News partner.) "We are poised in 2010 to see a surge of foreclosures from prime borrowers. Hundreds of billions of dollars in option [adjustable rate] mortgages are set to be recast" next year, Fernandez says. Option adjustable rate mortgages allow borrowers to make lower monthly payments for an initial period, after which the payments adjust--or "recast"--higher. For some borrowers, the new payments can be more than twice their initial payments. Combined with other factors, like the loss of a job, a recasting option adjustable rate mortgage can make borrowers more likely to default. "These are [properties] at higher price points [and] potentially in more desirable neighborhoods," Fernandez says.
4. Mortgage rates to rise: Anyone who purchased a home in 2009 was presented with some extremely attractive mortgage rates. Rates on 30-year, fixed mortgages fell to an average of 4.88 percent in November, down sharply from 6.09 a year earlier. A key factor behind the plunge was a Federal Reserve program, first announced in November of 2008, that purchased debt and mortgage-backed securities from Fannie Mae and Freddie Mac. But the program is slated to expire at the end of the first quarter, and if private investors don't step up, fixed mortgage rates could jump. (The Fed, of course, could always decide to extend the program.) The unwinding of this Fed program, the improving economy, and mounting concern over government deficits could push rates on 30-year, fixed mortgages to roughly 5.5 percent by mid-2010 and close to 6 percent by the end of the year, says Mike Larson of Weiss Research. "Almost all signs to me point higher," Larson says.
5. Buyer's market remains: With prices still falling, mortgage rates remaining historically attractive, and additional homes hitting the market in the form of foreclosures, the dynamics of the real estate market will continue to favor buyers over sellers in 2010. That means those looking to buy a home next year should not feel pressured to act impulsively. "You don't need to have a sense of urgency, but understand that as time progresses the balance of power as we get into 2010 is going to slowly but surely shift away from [buyers]," Larson says. "It is not going to be a strong seller's market, but it will be more evenly distributed as the year goes on." Data from the real estate firm Zillow show that home buyers are already losing the leverage they once enjoyed. While home buyers landed a median discount of 4.6 percent off listing prices in January, the size of the gap fell to 2.7 percent by October. Expect this gap to close further as 2010 marches on.
6. Modification plan could be modified: While the Obama administration has put nearly 700,000 borrowers into temporarily restructured mortgages, it had found permanent fixes for just 31,382 struggling homeowners through November. What's more, critics have identified two key shortcomings of the government's $75 billion antiforeclosure plan. First, the program isn't much help for borrowers struggling to stay in their homes as the result of a job loss. And the rickety labor market is a key factor behind rising delinquencies. At the same time, the plan does not sufficiently address the issue of negative equity--owing more on your home loan than the property is worth--which also works to increase foreclosures. "The current modification program does not address negative equity and is therefore destined to fail," Laurie Goodman, a senior managing director at Amherst Securities Group, told a congressional committee in written testimony on December 8. "It must be amended to explicitly address this problem." Zandi says the government may move next year to overhaul the modification program in two ways: improving troubled borrowers' negative equity positions by writing down some of the mortgage principal, and helping to turn troubled homeowners into renters.
7. FHA lending standards may increase: While banks have jacked up lending standards in the face of mounting delinquencies, mortgages backed by the Federal Housing Administration--which come with a minimum down payment of just 3.5 percent--have remained accessible to a wide swath of borrowers. The FHA guarantees nearly 30 percent of new-home purchase mortgages today, up sharply from just 3 percent in 2006. But the rapid growth has occurred alongside an increase in mortgage delinquencies. As a result, the FHA's reserves have dipped below congressionally mandated levels. The development has put pressure on the Obama administration to beef up its requirements for agency-backed home loans. In early December, the Department of Housing and Urban Development announced that it would make several changes to FHA mortgage requirements: raising up-front cash requirements, boosting minimum credit scores, and perhaps charging more for insurance premiums. Additional new restrictions may be in store. Taken together, the developments could work to choke off the supply of mortgage credit to borrowers who can't get financing elsewhere.
8. Tax credit available through June: On top of lower prices and cheap mortgage rates, Uncle Sam is offering an additional incentive to get buyers into the market next year. In early November, President Obama signed a bill extending and expanding a popular tax perk for home buyers. The legislation gives qualified first-time home buyers a tax credit of up to $8,000 if they close the purchase of a primary residence by the end of June. Meanwhile, qualified current home owners are eligible for a credit of up to $6,500 when they buy their next principal residence. But while the tax perk may make a home purchase more tempting, would-be buyers should make sure they have the job security and financial wherewithal to handle the transaction before going ahead. "Don't let [the home buyer tax credit] be the thing that drives you to act," Larson says.
9. Markets will vary a great deal by region: The performance of the national housing market is much less important that the dynamics of your local market, and sales and pricing trends will vary a great deal from one area to the next in 2010. "There will be geographic pockets where the values will still continue to decline, and there will be geographic pockets where they increase," said Dale Siegel, a mortgage broker and the author of The New Rules for Mortgages. That means anyone interested in buying real estate next year can't just read the national headlines. Instead, find a good blog that covers the local housing market and consider speaking with a real estate agent with experience in the area. Check out online listings--pay close attention to pricing and inventory trends. And make sure to head out to open houses to get a firsthand feel for the market.
10. Mobile maps can help: Advances in technology have enabled would-be home buyers to increase the efficiency of their searches. For example, Zillow's iPhone app allows home buyers to see the estimated values and listed prices of the properties they pass on the street. The app, which is free, has been downloaded more than 830,000 times. Trulia has unveiled a similar product that allows users to find nearby open houses as well. "If you are sitting in a neighborhood having brunch on a Sunday, you can very easily pull up your phone [and] walk into open houses," says Trulia's Fernandez.
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