Like many others, earlier today I watched President Obama’s mortgage relief plan delivered from Mesa, Arizona. I applaud him for the plan he laid out, but my optimism is tempered by the extraordinary challenge ahead and a concern that it may not go far enough, fast enough to turn the housing crisis around.
Home ownership is an essential pillar in the overall strength of the economy, and I am particularly encouraged by his focus on responsible home owners whose mortgages are underwater because of a sinking housing market. According to Moody’s, 27% of mortgages are higher than the current value of their homes, and keeping those homeowners from “throwing in the keys” should be a top priority and focus. Ultimately, this crisis started with foreclosures, and will end with foreclosures.
I also am encouraged by two other aspects of his proposal. The holy trinity of the lender, home owner and government shouldering the massive burden of responsibility. And second, that President Obama is focused on absolutely not giving speculators and irresponsible investors an easy way out.
Yesterday, Trulia.com released the results of a Harris Survey and the topic was consumer sentiment towards foreclosures. At the same we released our survey, Henry Paulson was quoted as saying “Banks need to lend more.” I agree banks need to lend more but lending more is not the answer to all our problems. Here are my recommendations:
· Keep home owners in their homes -- While we have rising foreclosure rates, we’ll see falling house prices. Further government assistance is required. Asset prices need to normalize, but without stabilizing them it could be a lot worse.
· Increase liquidity in the marketplace -- The government provided billions to bail out the financial sector, and it’s time for banks to start lending again. Credit markets are easing, but slowly and rates are falling.
· Take advantage of deals – Home buyers need to leverage first time home buyer programs. Low rates and historically low prices are a combination that we may never see again.
Even if the government gets it right, and that is a big IF, I still think we are in for a rough year in 2009. Here are my predictions:
· Median Sales Price is currently $183k and will drop to $160k. Which is down 12.5% from October 2008 NAR data.
· I expect 5 million transactions, which is the same run rate as this year. On the west coast and Miami we’re seeing an uptick in transactions while prices are falling. I’d expect this trend to continue.
· We will reach the bottom of the market in Q1 2010
· Rates: 30 year fixed rate at 4.5% is probable and lower is possible.
· The world of online real estate will start to mature and come into its own. There will be more tools to help homebuyers and sellers.
What are some of your predictions?
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