According to the Chinese calendar, 2010 is the Year of the Tiger. But in real estate, 2010 may come to be known as the "Year of the First-Time Home Buyer." Mark Zandi, chief economist at Moody's Economy.com, says there will be 1.84 million homes sold to first-time home buyers in 2010, compared with 1.73 million in 2009. These buyers will invariably make some mistakes that they will come to regret a few years down the road, some experts say, including failing to use a real estate professional to help them manage the transaction. Real estate professionals have the time and the knowledge to sift through thousands of listings, creating market analyses to judge pricing and other key features, points out Ray Boss Jr., a practitioner with RE/MAX Realty Group in Maryland. "I would want someone who is going to look out for my interests first and foremost," says Boss. "Someone who knows the contracts, who has experience negotiating, and who can walk me through the entire process smoothly - step by step - and make sure I get the house that's right for me."
With all the bad news about underwater homeowners and strategic walkaways, you might think that American homeowners' equity holdings are in the tank. But the least-publicized recent statistic on real estate is that, despite these scary reports, home equity is again on the rise. Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more home buying? Not unless you consider Federal Reserve economists to be shills for the real estate industry. The Fed conducts massive research into loan balances and home-value changes in hundreds of local markets around the country and reports its findings quarterly. According to the Fed's most recent "flow of funds" survey, homeowners' net equity grew by nearly $1 trillion from the recession's nadir in the first quarter of 2009 through the third quarter. From June 30 to Sept. 30, net equity rose by $418 billion.
Vacant residential lots are looking better and better to real estate investors. The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand. "The country needs 1.2 million new units for the next 10 years just because of population growth," says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. "[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant."
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