Housing markets will experience increasing sales in 2010 aided by the government’s extension and expansion of the first time home buyers federal tax credit, and more government-backed lending assistance, according to the new Housing Predictor national forecast for 2010.
Markets will improve in most of the U.S. with average housing deflation forecast at 8.7% nationally. The figure represents the lowest amount of deflation on an annual basis in the four years Housing Predictor has been forecasting markets. Some areas of the country will surprise homeowners with appreciation, while especially hard hit areas will see a repeat of double-digit deflation, despite rising home sales.
Unemployment soared to 10.2% nationally and in some areas tops 20%. The broader measure of underemployment is 17.5%, which has not been reached since the Great Depression. Most general economists contend an economic recovery has started. But with a jobless recovery anticipated real estate will deal with unprecedented troubles.
Without employment growth housing markets will stall and slowly work through a recovery phase since everyone who is unemployed or underemployed will have trouble making a mortgage, much less qualifying for a loan. High unemployment presents the single largest factor in a full economic recovery since so many jobs have been outsourced. Employment growth is projected to develop by Housing Predictor analysts, especially in technology but will take many months to develop.
On going troubles in the banking sector will contribute to more price deflation in home values in the worst hit markets, including areas in California, Florida and Nevada, where the highest number of foreclosures exist. Housing markets will drag towards improving stabilization without a healthy mortgage market.
After more than a three year downturn in the hardest hit areas of the nation, some markets have experienced slight rebounds, prompted by the first time buyers’ tax incentive and low mortgage rates. But higher price ranges have been hindered in their recovery. However, momentum should gain strength in the second half of the year with expected improvements in mortgage lending and make strides towards stabilizing in 2010.
A series of interest rate cuts taking mortgage rates to near historic lows are one of the Fed’s attempts to re-stimulate the housing market. But record foreclosures are producing a market that threatens to keep home prices at low levels for years to come. More than 19-million vacant homes sit empty in the U.S., much of which is an inventory that will have to be absorbed by home buyers before markets fully stabilize.
Still, signs of a recovery in housing are showing promise. As we maintained last year in our annual national forecast, improving conditions, however, do not signify that housing inflation or appreciation will develop in most areas for a number of years. The recovery will be a long haul.
As Congress and the Obama administration work towards coming up with a plan to repair the financial system, hopes remain high that the troubled market will recover from the worst economic housing depression in U.S. history. It has become abundantly clear that this housing downturn is like no other and will take monumental efforts to overcome.
The economic downturn is being pro-longed by the epidemic of foreclosures. In the Savings and Loan scandal, which peaked in 1989 the government didn’t react quick enough to make significant differences to stabilize real estate markets. It is the same case today as housing prices begin to level out in 2010 for the better.