What's Ahead for Real Estate in 2009?

2009 will be a year of recovery and stabilization for the real estate industry. Here are my 15 top predictions for 2009:

1. Mortgage rates will drop, then rise, and finally stabilize
• Rates will be at a historical low in the first part of the year.
• Rates will go up in spring & level off after the first half of the year.

2. Investors will come back into the market in 2009
• The Federal Reserve plans to pump up the housing sector by buying up to $100 billion dollars worth of bonds issued by Fannie Mae & Freddie Mac.
• The Fed will also buy ½ trillion dollars of mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae.

3. Buyers will jump off the fence and come back into the market
• With fixed rates in the mid-fives -- combined with pricing at 2003 and 2004 levels -- it is an excellent time to buy.

4. Sellers will become creative with alternative ways to add value to their home sale with incentives such as:
• Interest rate buy-downs
• Seller financing & Other incentives

5. Listing Inventory will go down as the market absorbs inventory
• Nationally, listing inventory will begin to go down as inventory is consumed by many markets where new home inventory is on the decline. Builders in 2008 focused on selling existing inventory and did not focus on building new projects so as the year goes on inventory numbers will decrease. Coupled with lower interest rates and higher investor confidence, this consumption of inventory will continue.

6. Market time will decline and remain on the lower end of the spectrum
• Days-on-market numbers will go down in 09 due to a lack of new home inventory coming on the market.

7. Real Estate agents will leave the industry in record numbers

8. Builders will use auctions to sell off inventory; many will leave the business entirely
• Builders will turn to auctions to liquidate remaining properties.
• Builders will leave the industry due to financial pressures from the lack of 2008 sales.
• New construction will virtually grind to a halt as builders are unable to develop new product as a result of excess inventory / poor sales in 2008.

9. New home inventories will reach record low numbers in the fall of 2009
• Many builders stopped buying land in 2008, and will therefore be unable to build in 2009.
• Builders stopped building in 2008 and concentrated on selling standing inventory. As a result, they were not building new inventory. This will lead to an inventory shortage in 2009.
• Existing new home inventory will be absorbed by the fall of 2009.

10. Consumer confidence will improve in the spring of 2009
• Consumer confidence will improve in the spring of 2009, and buyers jump back into the market…carefully.
• Consumers will look to real estate agents for guidance in buying and selling.

11. Appreciation will be small to nonexistent in most markets as the industry stabilizes
• Most markets across the country will see little or no appreciation while the market stabilizes and inventory gets absorbed by the market.
• Some markets will continue to see their markets decline into the second half of 2009 as inventory levels stabilize.

12. The rental market will BOOM IN 2009
• It’s estimated that almost 2 million homes will be foreclosed on in 2009. This will transform many former homeowners into tenants.
• Banks will rent their real estate owned properties rather than sell at a substantial loss.
• Tighter credit criteria will force potential buyers to renew their current leases after they are turned down for a mortgage.
• Consumer fear and an uncertain employment picture will keep would-be, credit- worthy buyers on the sidelines, leading to reduced turnover in rental housing.
• Americans who have realized a loss by recent homeownership will decide that ownership is not worth the risk and trouble. They will sign a rental lease and happily return to rental living.

13. "In demand" homes will become the "safe necessity" of 2009
• Smaller, green-built, and energy efficient homes will be in big demand.
• Home with a good location in relation to work and school will be in demand.
• Homes in the mid-range of price for their market will be in demand as more homebuyers become more frugal.

14. Real estate companies will merge in 2009
• Smaller real estate companies will merge with larger companies to make it through the market downturn.
• Competition in the industry will shrink as the number of companies and the numbers of agents is reduced.

15. Second home markets will see far less activity; many will suffer in 2009
• Second home markets in many markets will suffer due to the financial losses owners of second homes experienced as their stock portfolios, pensions, or other investments devalued and deteriorated.
• Second home markets will suffer due to consumers’ need to relocate assets and financial priorities.

While we will see adjustments in 2009, it’s sure to be a much better year than 2008.

Published by Realty Times: February 12, 2009