Here is some helpful information for anyone looking to purchase real estate in 2010.
1. More inventory is coming - NAR / RealtyTrac -say there are more than 2 million homes are currently in the foreclosure process, and foreclosure notices will rise to 3.1 million 2010. This flood of inventory will hit our market. One reasons for this is Obama Administration pressure banks to postpone repossessions until loan modifications could be attempted. However, many banks didn't have the staff to assess all their defaulted loans and they have just postponed dealing with them. Ultimately they go into foreclosure in 2010.
2. Loan-modification program has been disappointing. There are very strict requirements and only 4 % of those applying receiving them. The default rate on loans modified after the third quarter of 2008 was 61%! These homes will also becoming on the market.
3. Interest Rate to go up. Federal Reserve has indicated it plans to end the Tax Credit program that's helped keep mortgage rates at attractive levels for home buyers. The Fed program, which involved purchasing up to $1.25 trillion in mortgage-backed securities backed by Fannie and Freddie, will expire on March 31. Interest rates have already started to inch up in anticipation of the change, with the average 30-year fixed-rate mortgage surpassing the 5% mark in December.
4. Another bubble is coming. Another round of Toxic Alt-A and option ARMs loans are ready to reset over the next 12 to 18 months. At least $64 billion in option ARMs will reset in 2010 and another $68 billion in 2011, according to First American CoreLogic, a real estate and mortgage-data company. The number of homeowners defaulting on their mortgages is expected to surge. This will help keep prices down.
5. Tax Credit - The government's decision to extend the $8,000 first-time home-buyer tax credit to mid-2010 and expand the program to include a $6,500 credit for non-first-time home buyers will likely help lure home shoppers into the market. But will end this spring.
6. Home prices could fall another 5% to 10% when more foreclosures hit the market allowing many first time buyers a real chance at owning their own home.
"Classic has a YOU attitude"
Dave McKean
Broker, Owner, GRI
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