Is The Worst Of US Housing Over In 2010? | Mortgage

Is The Worst Of US Housing Over In 2010?

by EuJinChan

As we reached the end of 2009, we were beginning to see a flicker of light at the end of the tunnel as home sales advanced hitting its hottest levels in more than two years. Many felt that we have touched the floor in home prices with increased demand from home purchasers sparking fierce bidding activity 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.

Currently, the property market is not able to stand on its own as it is artificially propped up by the extended first-time-home-buyer tax credit coupled with the government's expensive purchases of mortgage backed securities (MBS). The U.S government has been purchasing mortgage-backed-securities or the bundling of home loans as of late 2008. The government purchases of these securities have helped to keep mortgage rates low and attractive. Mortgage-backed securities were once popularly sold through Wall Street to world-wide investors betting that U.S. housing will continue to prosper. These investors purchased MBS in hopes of earning a favorable return. This of course is the contrary as we are witnessing today with the demise of U.S. housing causing the market demand for mortgage-backed securities to shrink with no buyers or investors. As a result, the U.S. government stepped in to sustain the purchases of mortgage-backed securities so as to preserve low mortgage rates in an effort to prevent further hurt to U.S. home prices. By March of 2010, the U.S. government would have completed its purchase of a whopping $1.25 trillion worth of mortgage-backed-securities. There is speculation that the government may end its purchases of mortgage-backed-securities by March 2010. This may result in mortgage rates to spike by a full point. This may turn away many homebuyers as it raises the cost of buying a home.

All of these considerations were integrated into Economy.com's housing price forecast for 2010 with regards to local figures for income, population, interest rates and foreclosures. Their 2009 projection of a 14.5% price correction were quite spot on and not far from the reported 13.2%. According to Zandi, the worst hit areas such as Nevada, Florida, Arizona and California will have more foreclosures. He indicated Miami was the worst market where the 2009 median home cost of $183,530 is forecast to fall another 33% in 2010.

Zandi indicates the less debatable areas like the Pacific Northwest, New York and Virginia where home costs are pricey compared to rents. The better performing regions are found in the pockets of the Midwest where the rural and energy economies are stronger in places like Dakota, Kansas and Nebraska. Pittsburgh which never had a housing bubble is the sole home market that's anticipated to climb by 0.41% in 2010.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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