Real Estate Market

2010 Real estate market poised to spring ahead

by Broderick Perkins

2/19/10 - Want to know what to expect from this year's real estate market?

You already may be resolved to approach the housing market based on its recent ebbs and flows.

But given what's still to come, you may want to rethink your strategy.

To plug in watch move-up buyers, look to market trends in California and Florida, keep tabs on the federal government's efforts to pull housing from its hole, and track the smaller home sector, according to the head of a leading real estate firm who has her finger on the pulse of the housing market.

"Although we may be over a month into 2010, the real estate New Year has just begun," says Better Homes and Gardens Real Estate's president and CEO, Sherry Chris, has her finger on the pulse of the housing market and shares what's to come.

"Traditionally the week following the Super Bowl, when the holiday season is officially over and home buyers are beginning to think about the busy spring transaction season and busy summer moving season, the real estate industry kicks off with a flurry of new activity," says Chris, a boots-on-the ground executive who has more than 25 years of real estate experience, including work as a real estate agent.

Here's what Chris says are the leading market indicators set to shape the 2010 housing market.

• Tax Credit 2.0 Move-up buyers were included in the renewed tax credit, but all buyers have very little time if they don't already have a loan secured and housing needs established. Move-uppers also have to consider the prospect of selling their existing home.

Unless the credit is extended again, a home buyer must have a sale agreement in hand by April 30 and close escrow by June 30, 2010. Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.

"The move-up buyer is an important, and growing, demographic and its activity in the industry is pivotal," said Chris.

Expect another tax credit tidal wave as buyers scramble to cash in, says Chris.

• California's Dreamin' Again As goes California… Some of the Golden State's largest cities, including San Jose (the "capital" of Silicon Valley), were among the first to show signs of the housing downturn. As these same cities rebound, it's a signal of an upturning market. Look out for more growth signs across California to determine the pace and strength of the recovery.

•Sunshine State Golden Too Florida is witnessing the return of the individual buyer, rather than heavy-handed speculators snatching low-hanging fruit by the bushel to flip or rent. That's key for retiring Baby Boomers moving up and the younger generation of big spenders, the Echo Boomers.

The "G" Effect The government is largely responsible for the housing market not falling into an abyss. But now, it's like the proverbial calm before the perfect storm. The Federal Housing Administration (FHA), which accounts for 30 to 50 percent of mortgages in some locations, eased rule to move foreclosures off the market, but it also recently tightened loan requirements, increased the cost of mortgage insurance and made it tougher for lenders to participate.

Meanwhile, the Federal Reserve program to buy $1.25 trillion worth of mortgage-backed securities has pushed mortgage interest rates down and kept them low. However, Federal Reserve Board Chairman Ben S. Bernanke recently restated the Fed's intention to end the purchases by the end of March. That could cause interest rates to rise. If the rate moves from 5 percent to 6 percent on a $500,000 mortgage, the extra $300 a month could price many buyers out of the market.

• Smaller Gets Better…and Greener The McMansion market is McToast. Consumers are flocking to cheaper and more distressed homes, as well as building smaller homes. Lower-end properties have even caused bidding wars in some areas. This is a far cry from the McMansion market we saw a few years back. Expect for some time to pass to return to the bigger-is-better market -- if ever. Smaller homes are also smaller carbon footprints, and that's cool, in more was than one.

Home Sweet Home Value Nearly 11 million families in the U.S. hold a mortgage with a balance that's larger than the value of their home, but only about 20 percent are expected to file for foreclosure in 2010, demonstrating that consumers continue to value home ownership. With greater levels of assistance to help people get into and keep a home, home values will get a boost.

• Current Convergence of Favorable Conditions Right now, government support, low mortgage rates, low home prices, large inventories, distressed property bargains and other factors make is a great time to buy.

Sell? Not so much for those who purchased at the peak of the market with funny money.

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