Monday, December 07, 2009

HOUSING MARKET REBOUNDING AS AMERICA LOOKS FORWARD TO A NEW DECADE

A new decade is about to dawn, and real estate experts see rays of sunshine on the horizon for home buyers, homeowners and the nation’s housing market in 2010.

Boosted by the extension of the $8,000 first-time home-buyer tax credit, and the addition of a new $6,500 tax credit for existing homeowners the outlook for housing and the economy appears headed for a sustainable recovery, predicted Lawrence Yun, chief economist of the National Association of Realtors (NAR).

“Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices,” Yun said.

In fact, Yun said the credit is working better than first projected. It now appears that 2.3 million to 2.4 million first-time buyers will take advantage of the tax credit this year.

NAR’s 2009 “Profile of Home Buyers and Sellers” survey, shows first-time buyers accounted for a record 47-percent share of home sales over the past year, up from 41 percent in the 2008 survey. The first-time buyer’s share has risen steadily since a cyclical low of 36 percent in 2006.

For Americans desperately seeking a positive real estate outlook, here is the best housing news the nation has to offer:

• Bright mortgage outlook. Freddie Mac reported that benchmark 30-year fixed-rate mortgages averaged 4.78 percent in late November, down from 4.83 percent a week earlier. The 30-year fixed mortgage average has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent. A year ago, 30-year fixed loans averaged 5.97 percent.

“Interest rates for 30-year fixed-rate loans are currently 0.8 of 1 percentage point below this year’s peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage,” said Frank Nothaft, Freddie Mac vice president and chief economist.

• Rebound in existing home sales. NAR predicts existing-home sales are expected to total 5.01 million units in 2009, a gain of 2 percent over 2008. NAR is forecasting a rise of 13.6 percent to 5.69 million units in 2010.

In the Chicago area, year-over-year home sales were positive for the fourth consecutive month, up 33.3 percent to 7,286 homes and condominiums sold in October 2009 compared with 5,467 homes sold in October 2008, reported the Illinois Association of Realtors. The median home sale price for the Chicago area was $190,000 in October 2009, down 15.6 percent from $225,000 in October of 2008.

• New home sales on the rise. New-home sales are projected at 397,000 units nationwide in 2009. A rebound to 549,000 units in 2010 is forecast by the National Association of Home Builders. Housing starts, including multifamily units, should total 564,000 units this year but grow to 752,000 units in 2010.

In 2010, major home builders are expected to benefit from government assistance—a tax break that lets them offset losses incurred in 2008 and 2009.

• Home prices stabilizing. “We’ve seen a steady downtrend in housing inventory for well over a year and home prices appear to be in the early stages of stabilizing,” Yun said. Eleven of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller indexes.

With the expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, Yun predicted home prices should rise between 3 percent and 5 percent in 2010, but with wide geographic differences.