Best Buyers Market Forecast

Housing Buyers Market Despite the gloomy national economic outlook, the best buyers’ real estate market in at least four years will develop by late summer in most housing markets, according to the new Housing Predictor forecast. Lower interest rates will draw buyers to make purchases of homes more than in years.

Increased buyer activity in housing and more home sales will demonstrate the first signs of a recovery.

The $750-billion injection by the Fed to purchase troubled mortgage-backed securities, which are at the heart of the housing crisis, will help to boost the marketplace.

The Fed’s attempts are the single largest efforts made yet to stabilize housing markets, which have been deflating at unprecedented rates in the overwhelming majority of the country. The move coupled with President Barack Obama’s rescue plan are also the most significant attempts yet to stabilize the troubled economy triggered by the foreclosure epidemic forecast by Housing Predictor more than three years ago.

How long will it take before we get out of this mess? Conditions are moving in the right direction for a correction in housing markets to develop, but the unprecedented level of foreclosures will hamper the recovery for sometime. Economists just aren’t sure how long that will take.

Housing prices are not yet forecast to appreciate as a result of the Fed’s actions, but are efforts to stabilize markets, according to real estate analysts. As a result of the Fed’s actions mortgage rates dropped the day following the Fed’s move and are likely to drop further as mortgage companies react in coming weeks.

The Bank of England began buying government debt to expand the money supply in the United Kingdom known as quantitative easing. The moves by the Fed are in their play book of slowly moving to liquefy money markets and make mortgages, credit card rates and business lending rates more appealing to money managers and the public to spur lending. Mortgage rates on 30-year fixed rates mortgages now average below 5% and are expected to drop further.

The Federal Reserve will also spend $300 billion over the next six months buying long-term government bonds in further efforts to lift the nation out of its deepening recession by lowering interest rates. The Fed’s key lending rate also remains at a record low of between zero and 0.25 percent. Economists expect the Fed will leave the rate alone for the remainder of the year, and perhaps into 2010.

The unprecedented downturn in housing values over more than the past two years is projected to linger throughout at least the rest of 2009 as the excess inventory of homes on the market for sale are bought up in many markets. Pent up buyer demand for housing is at its highest level since at least mid-2005 and may develop to be at an all-time high as the inventory adjusts.

Record rates of foreclosures in all but six states tracked by Housing Predictor now compose the majority of sales in housing, and are beginning to control sales figures for land, where buyers are making purchases as much as 70% off the markets peak high prices.

Fed purchases have boosted Treasury bond prices and are driving down their rates. The ripple effect is triggering lower interest rates on all sorts of borrowing, which is key to housing’s recovery. However, analysts concur a bottom will also have to be placed soundly below foreclosures before the economy can recover.

Assets from the government’s rescue plan are being funneled to lenders handling foreclosures to buy up at least part of their toxic mortgages. The combined programs are now projected to top $3-trillion.