Your 2010 home-price predictions
Hope may spring eternal, but many of you responded with skepticism to First American CoreLogic's prediction that Maryland home prices will be 4 percent higher next October than they were in October of this year.
Forty-one percent of you Wonk readers who took the poll this week expect prices will fall. Thirty-four percent of you think they'll rise, though not necessarily the amount First American is forecasting. And 24 percent of you believe prices will be flat.
(Among the bearish folks, the breakdown between those who expect a slight decrease vs. those who expect a significant one was about 60/40. Among the bulls, the most popular answer was an increase of about 4 percent, followed by less than 4 percent, and finally "I expect prices will increase more than that.")
And one reader wrote in an answer: "Depends where in MD. Balt = signif down. DC= up."
Frank Rizzo summed up a number of the bears' concerns in a comment:
Once the rate subsidies expire, mortgage rates will be at least 6%, if not 7% since investors do not want to buy the paper. When the tax credit expires the end of next year, you will see prices fall again as people will be forced to pay more money out of pocket. The 3.5% down payment [required by FHA] has left many buyers with very little skin in the game. As more and more homeowners become underwater, you will see more strategic defaults which only make the problem worse. The housing bubble was over inflated by these very same programs. Instead of letting the free market correct itself, Gov't intervention is only trying to "re-inflate" a bubble that will once again burst.
The chief executive of real estate search engine Trulia, Pete Flint, noted some of the same issues when he recently made predictions for U.S. real estate in 2010:
* We will continue to see lots of volatility in the housing market through 2010 -- in for a double dip in the second half of 2010.
* Three major factors will contribute to the drop off in the second half of the year:
o Government intervention will disappear
o Shadow inventory will hit the market
o Mortgage rates will rise
* The tax credit has not created new demand, only pushed demand forward to the beginning of 2010.
* When the tax credit runs out, interest rates creep up and more inventory hits the market, we can expect prices to drop once again. For 2010, I predict:
o Sales volume to be flat compared to 2009 (5 to 5.5 million homes)
o Prices to drop another 5% to 10%
o Inventory levels to creep back up
o Mortgage rates move back into the range of 6%
How will the state of the housing market in 2010 affect you? What are you hoping to see?