My 2009 Real Estate Predictions

The Real Estate Monkey’s 2009 Real Estate Predictions

After almost a decade in the business I have seen many things, but nothing like what is in store for the 2009 real estate market.  It’s not uncommon for a listener of my radio show or a reader of my blogs to accuse us of being optimistic of the investment real estate market. You see, they think that because I make a living off of deals that I have to be optimistic but the truth is NOW really is the time to make money.  2009 will be a great year.

Due to the shift in the market over the last six to twelve months, a recession in the housing market has been born.  The time is perfect for the true real estate investor to step to the forefront.  “Light” has its “dark,” “up” has its “down” and “hard-times” for some has its “great-times” for others and now my friends is the GREAT TIME for us.

Here are my predictions for the real estate market in 2009.

·         No appreciation in the market – the market in the past year or so has been erratic, at best, with foreclosure becoming the problem du jour throughout the United States.  Due to the vast number of foreclosures and spiraling downward values of most homes has created a market with little to no appreciation in values.  This trend of constant value with no appreciation will continue throughout the majority of 2009 and into early 2010. You may see some values start to creep back into the market near the middle of 2010.
 

·         Mortgage rates will be driven higher – Because mortgage rates are influenced by mortgage bonds and mortgage-backed securities (MBS), not fed rates, I predict interest rates will continue to rise throughout 2009 and finish the year between 7 – 8 percent.  On the bright side I don’t believe we will ever see the rates of the Reaganomic years again.

·        A “Seller’s market” will appear  – Due to limited “real” inventory of homes from Sellers who can actually sell their homes, coupled with driven-down values by foreclosures, short sales and bank-owned properties, more Buyers will find themselves climbing over each other to get to the attractive listings throughout 2009. It will NOT be unusual for sellers to receive multiple offers for these properties.   In early to mid 2010 the “multiple offers” situation will drive up the prices of the properties, thus carrying other homes values along as well. The stiff competition will cause frustration and confusion among buyers who will find themselves going head-to-head with investors. The need for financing by a buyer will be out-shadowed by the cash Buyer and lose every time. This means it will be more important than ever for home buyers to hire an excellent Realtor like Raymond Modglin
 

·       Banks will get “tricky” – In an effort to drive up housing prices, banks will slowly introduce their REO inventory to the market at prices at market or near-market values throughout all of 2009, Under greater pressure to cut losses and increase revenue, banks will be forced to find ways to recoup their losses and regain consumer trust. Although state and federal charters prohibit banks from renting out bank-owned homes, banks will find a way to work around this prohibition.  By transferring title from bank-owned homes into holding companies, banks may find a loophole that will allow them to rent out homes instead of putting them on the market. This maneuver will let banks receive income while waiting for the market to turnaround.  However, there is a silver lining to this crafty maneuver, property management companies as well as construction (rehab) companies will be hired to manage and repair these properties for higher rental returns.

·        Loan modification will drastically decrease – Banks are in business to make money and it always much easier and less expensive to foreclose than attempt to modify a loan when you take into account a foreclosure is always successful whereas only a few loan modifications will be successful.  Furthermore, if a bank must rewrite a loan, they will prefer to write those loans to new borrowers who meet newer more rigid standards than modify a loan with somebody that historically has had problems.  As a result, the number of foreclosures will continue to rise throughout 2009 while loan modifications will wane early on in the year.

·        The rental market will expand – Due to the mounting number of homeowners losing their homes to foreclosure, the tenant market will continue to swell throughout 2009 and into early 2010.  There will be fewer rental homes available than the demand will dictate, which will put upward pressure on rental rates. Sellers who are unwilling to take a hit on their sales prices will put their homes on the market as rentals, but that won’t provide enough inventory to fulfill demand.  Overall, it’s a good time to be landlord

·         Uncle Sam will kill tax incentives – Many Sellers who hope to sell in 2009 may get hit with an unexpected change in the I.R.S. Tax Code Section 121. The law has been exempting the first $500,000 of capital gains, for married couples, and the first $250,000 of capital gains, for single people, since 1997.   In order to fill the governments coffers, I predict one method would be to change the home sale tax exclusion in 2009, disallowing the “free money” that up to now sellers have been able to pull out upon the sale of their homes. 

These predictions are all my opinion and may, or may not, come to fruition; however, one thing is very true, real estate agents will be leaving the business as times are becoming tougher and tougher.  The industry will weed itself of lackluster and inexperienced real estate agents as well as mortgage brokers, title representatives and bankers. This process of “thinning the heard” will produce better choices for all Sellers and Buyers and hopefully restore balance to the consumer.