Is The Worst Of US Housing Over In 2010?

As we approached late 2009, we saw a glimmer of light at the end of the tunnel as home sales accelerated to new highs in more than 2 years. Many assumed that we have hit bottom in home prices with increased activity from home purchasers bidding against each other in auctions 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 these concerns were tied into Economy.com’s housing price prediction for 2010 with reference to local figures for income, population, interest rates and foreclosures. Their 2009 projection of a 14.5% reduction were quite realistic and not way off from the reported 13.2%. According to Zandi, the severely hit areas such as Nevada, Florida, Arizona and California will encounter more foreclosures. He indicated Miami was the worst market where the 2009 median home price of $183,530 is anticipated to drop another 33% in 2010.

Zandi illustrates the less talked about areas like the Pacific Northwest, New York and Virginia where home prices remain expensive compared to rents. The flourishing regions are found in the pockets of the Midwest where the farming and energy economies are stronger in places like Dakota, Kansas and Nebraska. Pittsburgh which never saw a housing bubble is the only home market that is poised to increase by 0.41% in 2010.

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