As we enter a new year, I can’t decide if I want to jump on the prediction band wagon like everybody else or just wish everyone a happy new year and let it be. Maybe a little bit of both is in order. Particularly for homeowners or prospective homeowners, it’s hard to fathom a happy 2009 with the world falling apart around us. But journey with me into my own little mortgagetopia for awhile, and let’s see what my crystal ball comes up with.
I find it extremely likely that foreclosures and mortgage-related problems will continue to rise throughout 2009. The most current analysis I’ve seen indicates foreclosure activity may reach a peak of around 7% of all mortgaged properties – about 3 times the historical norm of 2%. Even with President-Elect Obama’s tentative $850 billion stimulus plan, we probably will not see foreclosure activity abate until 2010.
Mortgage rates will remain at historical, all-time lows. There’s been chatter about the Government only subsidizing purchase rates down to 4.5%, but the reality is they have little control over that function on the secondary markets and we’ve already seen rates breach that mark momentarily on December 17. On that date, rates were available as low as 4.375% on a 30-year fixed mortgage.
Between low mortgage rates and foreclosed properties, the recipe blends well into an excellent buying opportunity. I just got out of a meeting with one of my Realtor friends, who told me his bank-owned listings are priced to move in 90 days or less. Typical marketing times are 6-9 months right now, so to move them that quickly requires a steep discount from market prices. In one example, he sold a foreclosed property for $150k less than it appraised for – even in this market.
I also foresee a sharp and immediate stabilization in home values in late 2009, as the economic pendulum quickly swings back towards normalcy from an over-corrected, over-conservative position. This will happen after inventories drop to more reasonable levels, and buyers suddenly realize they’re about to miss the boat on their steeply discounted dream home.
So, there you have it. My economic reality check for 2009, combined with my best wishes for all you in the coming year. I hope you’ve enjoyed reading my blog, and I look forward to being back at it next week. Have a safe New Year’s celebration!
Also available by RSS Feed