Q. Are home prices going to go up in value in 2010?
A. Prices will go down in 2010 by more than 10%. High inventory will be the major theme of 2010. Many potential buyers will be priced out of the current market because of rising interest rates, tightening loan standards, lack of incentive and over stimulation from the amount of information available to them.
My thought process:
Buyers? There will be less buyers.
2. Interest rates will go up pricing buyers out of the market.
3. Unemployment is to high and people don't buy without a job.
4. Buyers are having a really hard time getting a loan to buy a home.
5. The gap between rents and mortgage payments make renting very attractive based on what your rent would be vs. owning.
6. A lot of buyers think that the market will be flooded by foreclosures causing supply to overrun demand pushing prices down, which in my opinion will never happen(More Foreclosures in 2010 Mean Opportunities for Bargain Hunters).
7. FHA who controls the availability and terms of most loans is in a deleveraging mode reflected in it's recent increase in the premium from 1.75% to 2.25% for it's mortgage insurance.
8. Homes are very affordable based on average SFR payment vs. the number of potential home buyers who can afford that payment today.
9. The complicated and long process of buying a shortsale or foreclosure has deturd some buyers.
10. Buyers are aware of new listings and price changes immidiatly which deminstrates the markets effientcy which adds to volitility in price. Most investment money will avoid Real Estate until there is a definitive tread to the upside.
Sellers? There are 2 sellers now..banks and homeowners.
1. Banks represent about 1/3 of the sellers in today's market which is a bad thing for prices.
2.They also have a inventory of homes that they plan on selling in the future which has been a major negative factor in the Real Estate market because of the potential oversupply of the market.
3. Anyone who bought in 2005-2009 is upside down which is positive because it means less inventory which lowers potential supply.
4. Standard sales are dictated by events in home-owners lifes. The reasons why people sell a home are divorce, death, job loss, up sizing, down sizing, relocating for job or retirement, the rare life-style upgrade and tax exchange. You can see that the majority of these reasons do not take into account any variables except a specfic event that is time orentatied. This makes this type of potenial inventory very predictable and stable which is a good thing for prices.
