Real Estate Forecast for 2010
As the fourth year of the real estate downturn comes to a close, 2009 year, the housing market showed signs of life — with the government juicing the market with $8,000 tax credit for first-time homebuyers and the Federal Reserve pushing record low mortgage rates by purchasing mortgage-backed securities.
Some glimmers of hope will be short live, with foreclosures and unemployment climbing, home prices have further to fall. What will happen when government subsidies and market intervention end?
Mark Zandi, chief economist at Moody’s Economy.com, estimates that 2.4 million homeowners will be in foreclosure. Zandi expects banks to start putting more foreclosed properties on the market during the first half of 2010.
“I see the market holding on in the low end,” said Alan Jay Brinkmann, chief economist at the Mortgage Bankers Association in Washington.
Operating against such a big boost in distressed properties, Brinkmann said, is the Obama administration’s preference for mortgage modifications rather than working to streamline short-sales.
“Washington sees people in their homes, and short-sales are not favorably viewed,” Brinkmann said.
Obama Mortgage Modification Doomed to Fail
Despite the government paying up to $1,500 for each modification, plus $1,000 a year for up to 3 years for each borrower who remains current to mortgage servicers, the program is a failure. 650,000 borrowers (expected 1.4 million) have been given trial modifications, but only a fraction of those loans have become permanent.
The Home Affordable Modification Program (HAMP), which provides incentives to mortgage servicers, lender/investors and borrowers that participate in modification of mortgages to reduce monthly payments. The goal is to stop the increasing foreclosure crisis.
Mortgage experts speaking before the House Financial Services Committee have all concluded the Obama administration’s mortgage modification program is “destined to fail” and doesn’t address the issue of negative equity.
“There are two main reasons why addressing the question of equity position is so important: the incentives to homeowners to continue to perform on their loans, and the ability of the HAMP program to help people in payment option ARM and interest-only loans,” said Julia Gordon at the Center for Responsible Lending.
“Many analysts believe that principal reduction is ultimately the only way to help the housing market reach equilibrium and begin to recover.”
Housing Market in 2010
Optimistic economist see the housing recovery is about to begin. The data tells us a gloomy reality. That is. The housing market will continue to struggle. Home prices still have further to fall. Unemployment rate continue to be over 10%. Shadow inventory of foreclosure banks that are holding onto will flood the market. Foreclosures will continue to climb in 2010.
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