Housing Price Predictions for 2009

The current fluctuations in the market make specific predictions difficult but with economic difficulties expected to extend throughout 2009 and recovery not expected until 2010, housing prices are expected to continue a downward decline throughout 2009. This is generally viewed, understandably, as a negative trend by homeowners as it impacts their ability to borrow against the value of their home. The nature of free market economics, however, define the current situation as a buyers market, which means that the advantage has passed from the owner to the buyer. Of course, the simultaneous credit crunch that has affected the nation has made purchasing homes more difficult than it was during the real estate bubble that has defined the last several years.

Some modest increases in home values were seen in the west, particularly in California. It’s notable that this region was one of the most affected by the bubble economy so this increase in value may just constitute a minor fluctuation in the market. As is the case in any market, prices are driven by demand. At present, low levels of demand, high levels of foreclosure and diminishing consumer confidence have all come together in a perfect storm to drive the value of homes downward overall.

Home sales were slightly up in the first months of 2009. These sales were characterized by bargain hunting among buyers and market analysts estimate that between 40 and 45 percent of these sales were of distressed properties: those which were available due to foreclosure. Analysts estimate that these homes are selling for an average of 20 percent less than the usual price. Foreclosures, of course, drive down the property value of nearby homes. It also drops the median price for homes overall.

The overall price of homes nationwide dropped 15.5 percent, on average, for homes of all types, condos, single-family and other types of property. In February of 2008, the average single family home carried a price tag of approximately $196,000. In February 2009, that figure was closer to $164,000. Again, this constitutes bad news for homeowners and potentially good news for home buyers. The housing bubble, of course, is largely blamed for bringing the economy to its current condition as buyers took out large mortgages on properties with inflated values. As these values decline, more buyers are able to enter the market.

That trend of entering the market is already starting to be visible. February, along with job losses and the decline in home values, saw a 5 percent increase in the amount of buyers actively seeking new homes. This is partially credited to the institution of an $8,000 first time buyer credit for those seeking new homes. Applications for new mortgages also increased during the same month. Realtors hope to see increases in sales beginning in late spring.

This increase in buying, along with the increase in home prices it may bring along with it, should not be regarded with too much vigor, however. The spring season typically constitutes a busy season in home sales and it remains to be seen whether this trend is seasonal or a sign of a recovering economy.

photo credit: TheTruthAbout…