In the last weeks of 2009 there were quite a few conflicting stories on the state of the real estate market, and what we might expect in 2010. Several articles claimed that the bottom of the market was reached, that prices were rising and buyers were plentiful. They said this year would be the year the market began to recover.
Other articles (some published simultaneously) claimed that the bottom is not even in sight, that prices will continue to drop, and that because of several key factors (more foreclosures, the end of the homebuyer tax credit in the spring and the probability of rising interest rates this year), the market will not recover soon.
So, who do you believe? It is frustrating to try and decipher the messages in the opposing viewpoints, but one thing is clear: no matter which view you choose to believe, now may be the best time to sell your home to get the best price. Let’s look at the three biggest housing factors that will affect us in 2010 and you will see why.
1. Foreclosures. Many warn that we are on the precipice of another foreclosure iceberg. Option ARM mortgage rates will be adjusting for many homeowners this year, and many will not be able to pay the high mortgages. This could lead to a large number of defaults, as values will be much lower than the amounts owed on the properties. Loan modification programs have not been as successful as intended, and many homeowners will end up walking away from attempts to modify their loans (or the lenders will just give up and issue a foreclosure notice).
2. Homebuyer Tax Credits. The tax credits, which were recently extended and expanded to cover not only first time home buyers, will expire in April 2010. The credit has been a great help to the market and is one of the main reasons buyers have been buying once again. What will happen when they expire? Will buyers still be as willing to shop for homes? Many recent articles claim that the end of the tax credits will devastate the housing market. While I personally disagree with this theory (I think there will be more inventory and those with down payments will be able to get some fantastic deals and utilize negotiating power), if we combine loss of tax credits with a lot of new foreclosure inventory it may not be a jolt to the market. BUT if the job market improves these factors could prove positive for buyers.
3. Rising Interest Rates. Many economists have predicted that interest rates will rise in 2010, likely once the tax credits have expired. The Federal Reserve has kept interest rates low for a long time, and this has helped the market to stabilize in many areas, but programs to purchase mortgage-backed securities (which have kept the rates low) will end in March.
If the rates rise, will homes still sell? No tax credit, higher mortgage rates, and the possibility of many lender-owned properties on the market….this may not be good news, nor provide any incentives to buyers (who may just choose to sit back, watch the market and wait, creating a big fence sitter syndrome). This is the area where there are a lot of negative predictions, but we also have to keep in mind that on a historical level interest rates will STILL be low even if they crawl above the 6% mark, as some predict.
So…how does this make it a great time to sell? Because NOW the tax credits are still in place, the inventory is still historically low, and rates are low. If you are thinking of selling in the Spring of 2010, you really should consider selling at the beginning of the year while all these factors are in your favor. Chances are you will get a better price for your home before the Spring…something to think about.