Housing Will Decline In 2010
According to this CNBC article, Housing Slump May Worsen Next Year, Not Get Better, in 2010 the housing market will get worse, not better. Their premise is that due to the first time home buyer tax credit (and the recent extension and expansion), "Sales of existing homes will peak in the final quarter of 2009, then begin a year-long slide, which is likely to be a sharp one, according to some estimates."
The article quotes Global Insight economist Patrick Newport as saying "Most of it [the tax credit] is simply shifting sales from one period to another. "It doesn’t get rid of the fundamental problem; there's still a glut of houses. At the end of 2010, you’re still going to have that glut." That is why I have been saying that new home construction does not need to slow - it needs to stop completely. According to Newport, single-family home sales will reach an annual rate of 5.88 million units in the 4th quarter of 2009 (vs. 5.30 in the third quarter). In 2010 he predicts that home sales will decline to 5.65 million units in the 1st quarter of 2010 and average around 4.75 million units in the second half of 2010. That indeed is a large decline.
According to the article, even David Crowe, chief economist at the National Association of Home Builders (NAHB), agrees with the sales shifting premise when he said "We expect a little stall in 2010. I agree, you do advance demand, so you steal it for (from?) the future. The economy and the job market didn't pick up as people expected in '09 and as a consequence that is rolling it in 2010." According to the article, NAHB has predicts a homes sales situation similar to that above with single family home sales reaching a peak of 5.60 million units in the 1st quarter 2010 and declining to about 4.50 million units in the 3rd quarter of 2010, for a 2010 home sales average of 5.15 million units.
According to the article, supporters of the tax credit (and the recent extension and $6,500 expansion to repeat home buyers) did believe that the tax credit would prompt some people to purchase a home sooner than they originally intended, thus reducing the future buyer pool, but those lost future purchases would eventually be replaced by another group of home buyers brought into the real estate market by the improving economy and job market. However, now there is doubt that the $6,500 credit for repeat buyers will help the housing market at all due to the original tax credit not being enough to help new home sales.
The article quotes Andrew Jakobovics, associate director for housing and economics at the Center for American Progress, as saying "I don’t know if the expansion is really going to get anyone else into the market, if you think about what the transaction costs (are). The people who are going to take advantage of it [the tax credit] were going to move anyway. A lot of the new households will be renters or stay renters." I agree in that the marginal effect of the tax credit extension/expansion will be much smaller than NAHB and NAR want. The article states "Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year. That's too high to make much of a dent in the current glut. Inventory levels are now at an 8-9-month supply--Down from the 10-11-month levels of early 2009, but still above the 6-7-month goal. Another casualty of the job market is household creation, which has meant a steady stream of buyers in the past, helping keep inventories at a healthy level. In 2008, for the first time in years, household creation fell—and sharply, too. At the same time, the number of young adults living at home and average marriage ages increased. More recently, there has been a flattening." As a result the less than desired tax credit effects, continuing high unemployment, and declining and/or flattening of household formation, the housing market will still be in poor shape near the end of 2010. Add in the expiration of the tax credit, the coming end of the government mortgage buying programs and the failing FHA (due to record defaults) - see my blog posts: Housing Faces Upcoming Challenges and Our Phony Real Estate Market - the housing market could be substantially worse in 2010. In fact, short sales and foreclosures will likely increase in 2010 and the result will continued downward pressure on housing prices.
As always, the article mentions that Lawrence Yun, NAR's chief ecomonist, as being bullish on real estate with a prediction that home prices will increase by 4% in 2010. As a homeowner I would like to believe this, but it just defies common sense.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN). If you do need to short sell your home or property, or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.
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