Long Island Real Estate Market - Home Prices To Rise 4% In 2010
Home prices are expected to grow modestly next year and sales will keep rising as the housing market continues to recover from the worst downturn since the Great Depression, the National Association of Realtors said Friday.
Home resales are projected to total 5.7 million next year, up from an estimated 5 million this year. Prices will climb about 4 percent after a projected decline of 13 percent this year, according to Lawrence Yun, chief economist for the trade association.
"Going into 2010, I anticipate that prices will also begin stabilizing or begin to modestly improve," Yun told the audience at the association's annual conference and expo in San Diego.
That should help ease buyers' anxiety. "I don't think the fear factor will be at play in 2010," Yun said.
The housing market's rebound has been aided by an aggressive federal intervention to lower mortgage rates and bring more buyers into the market. Home resales rose in September to the highest level in more than two years, something Yun said shows buyers are eager to get back into the market.
A federal tax credit of up to $8,000 for first-time homebuyers has helped stoke sales this year. The incentive was set to expire at the end of this month, but the NAR and other housing groups successfully lobbied to get the credit extended.
Now buyers can claim the credit if they sign a contract by April 30, 2010 and close the deal by the end of June. Lawmakers also expanded the program to include a $6,500 credit for existing homeowners who have lived in their current residence for at least five years.
First-time buyers accounted for a record 47 percent of home sales this year, up from 41 percent last year, the trade group said.
That surge helped drive traffic for real estate agents like Jan McGill of Omaha, Neb., and the extension makes her more optimistic about business next year.
"I've got to be positive," McGill said.
Yun estimated around 2 million people took advantage of the tax credit this year and projects it will continue to lift the market.
However, some housing analysts said the NAR's forecast was overly optimistic, as it was during the housing bubble. Economists like Patrick Newport argue the tax credit has already enticed many buyers who otherwise would have waited until next year.
"It induced first-time homebuyers who were going to buy a home in 2010 to buy in 2009 because they thought it wasn't going to be extended," said Newport, an economist at IHS Global Insight.
Newport is projecting home prices will fall between 3 percent and 5 percent next year and sales of existing homes will be flat, at best.
"I don't think that second tax credit is going to create a lot of new homebuyers," he said.
But Yun supports his case by pointing to data from 2000, prior to the housing boom, when 11 million renters had the income necessary to buy a median-priced home. This year, he said, there are 16 million renters in that position.
"This clearly shows that there's potential pent-up demand that could be tapped," he said.
His forecast calls for sales of newly built homes to surge by about 38 percent from 2009 levels. That translates to about 549,000 homes, still well below historical trends.
Yun also sees the average interest rate on a 30-year, fixed mortgage creeping up to 5.8 percent by the end of 2010 from about 5 percent today.
Foreclosures, meanwhile, should peak in the first half of the year, he said.
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