Predictions for 2010 (and What They Mean to You)

A month now into 2010, a lot of people are wondering what the new year is going to bring. Is it going to be a good time to buy or sell a house? A bad time? Will the market continue to grow? Will prices stay the same, or go up? How will foreclosures and the first-time homebuyer tax credit impact the market?

My point is, by looking at statistics and trends from last year, and by knowing several things that are almost certain to occur this year, we can actually pretty easily predict the answers to these questions. Last year showed a lot of strong growth in the Southwest Florida real estate market, but we also know two things about 2010: one, the first-time homebuyer tax credit is ending this spring, and two, there are still more foreclosures trickling in.

We have discussed the sales numbers for 2009 before. The market in Southwest Florida, including the areas I specialize in – Bonita Springs and Estero – saw strong growth throughout the year. For instance, the number of closed sales in Naples, Bonita, and Estero for just the month of December 2009 showed an increase of 54 percent over December 2008. Year-end numbers demonstrated that the growth was consistent, with 2009’s closed sales up 42 percent from 2008.

Looking at these numbers, I think it’s safe to say that we will see more growth in the coming year. Many professionals expect moderate growth during the first quarter of the year. Due in part to the deadline for the first-time homebuyer credit, more growth is expected in the second quarter. Growth in the second half of the year won’t be as extreme: Not only will the tax credit expire, but economists are also expecting interest rates to rise moderately throughout the year.

There is a lot of discussion about how the first-time homebuyer tax credit is destined to affect the market. It is true that the tax credit encouraged a lot of people to buy a home who might not have otherwise; Economy.com estimates that perhaps around 500,000 sales were a direct result of the tax credit. Clearly the tax credit is nothing to sneeze at, and it is expected to have a similar impact on the market in the first half of 2010.

Because of the tax credit’s expiration date, however, market growth in the coming year is not likely to be very steady. In order to qualify for the credit, the homebuyer must be under contract by the end of April, and the sale must close by the end of June. In 2009, thanks to the original expiration date of November 30 th , the tax credit inspired substantial growth during the months of October and November. Therefore I think it’s safe to say that we’ll see the most dramatic increases in the numbers of pending and closed sales in the second quarter of 2010, as people rush to buy before the tax credit expires on June 30 th .

Of course, one can’t overlook the role that foreclosures will most likely play in 2010. Toward the end of 2009, the Mortgage Bankers Association reported that 13 percent of the 44.7 million mortgages they track were in trouble; using those statistics, an estimated 7.5 million mortgages nationwide are behind. Some of those will get caught up, of course, but many won’t. In addition, many banks are currently sitting on homes that have foreclosed, instead of trying to sell them right away.

In other words, there are a lot of foreclosed homes that are likely to hit the market this year. Amherst Securities estimates that nationwide, there will be about 7 million distressed properties hitting the market in 2010 and 2011. As we have seen already, a lot of foreclosures tend to have a major impact on pricing trends, as other sellers find they have to compete for buyers who are looking for a good deal. As a result, we can expect that prices will remain pretty competitive in 2010.

What does all of this mean for buyers and sellers in Southwest Florida? For buyers, it means that you have only a few more months to find a home and get it under contract before the April 30 th deadline. Good deals are to be had right now, though, especially if you start looking soon and leave yourself more time to find the perfect house.

Likewise, if you are planning on selling your home this year, you will want to list it sooner rather than later. Because of the tax credit deadline, most of the buying activity this year will take place in the first two quarters, so that is when your home needs to be on the market.

For sellers, it also means that price will continue to be a crucial issue. As we have seen in 2009, the most competitively priced houses sell first and fastest, so you will need to be proactive about making sure your listing price is appropriate. Your real estate agent can do a comparative market analysis (CMA) to determine pricing trends in your neighborhood for the last six months. Once you’ve set a price you think will attract buyers, be sure to keep an eye on how much interest the listing is getting, as not enough showings is a clear sign that the price needs to be lowered.

It’s shaping up to be a good year for the real estate market, but like anything you still need to know how to play the game – and timing and pricing are destined to play critical roles in 2010. To discuss forecasted real estate trends for 2010, or to find out how to increase your chances of a successful sale, feel free to contact me. My door is always open!

-Special Advertising Content contributed by D. Michael Burke, KELLER WILLIAMS ELITE REALTY , www.CoconutPointRealEstate.com