There is a lot of turmoil in the market these days that makes it hard to know what is going on. Is it rising or falling? So many experts are out there making their predictions, but they look nationwide or citywide. But what is going on in your specific farm area? Follow these steps to determine what your housing market will do in 2010.
Many different factors are responsible for whether prices rise or fall in a specific market. Markets all react to their own unique conditions. Different neighborhoods and even different types of properties will react to the circumstances that affect them specifically.
You want to look at homes that are within a 1 mile radius from the center of your farm area. You also should look at the at homes that are within 10% of the median square footage of the homes you would like to buy and sell.
Home prices are for the most part determined by the months of housing inventory available. Price changes tend to lag behind changes in inventory by about 6-10 months. So if housing inventory increases, you will see a decrease in prices about 6-10 months later. If the inventory decreases, prices will then rise about 6-10 months later. Real estate investors are able to use short sales to offer deeply discounted prices when they sell houses before the rest of the homes in an area catch up.
If there are 8 months or more of inventory, prices will fall; if there are 2-3 months of inventory, prices rise. Use this as a rule of thumb in your local market in 2010.
In many areas the first round of the First Time Homebuyer credit could not quench the high demand for starter homes. If your are is one of them, the feeding frenzy for lower end homes could continue. Since the credit was expanded to all buyers, sales and prices may be boosted because there will be a larger supply of both homes and buyers available. The impact of the credit might not be that large, though. Only 6% of people who bought homes this last fall said that they did it because of the tax credit.
People born between 1977 and 1994, also known as Gen Y’ers, are entering their prime home-purchasing years. Areas that are able to generate jobs for people in this age group or have remained stable during the recession will probably only take a small increase in demand to spark building.
The cost of ownership is another factor that directly drives up the price of homes. In 2010, the U.S. Treasury will play a very important role in determining whether the market will rise or fall. There was been little incentive shown by the Federal Reserve to raise interest rates in 2009, but it might be different in 2010. The Fed might experience pressure to raise interest rates in order to attract more buyers of U.S. debt. Even just a small increase in interest rates could drive potential buyers out of the market.
Higher property taxes or income taxes at the state and local level could drive potential buyers out of the market. Local and state governments might succumb to pressure to raise these rates in order to balance their budgets for 2011.
Last is the impact foreclosures will have in your specific market. There will probably be spikes in foreclosures occurring in markets that relied heavily on Option ARM mortgages to sell homes from 2004-2007. These rates will reset soon as interest rates increase, causing foreclosures to spike. Those communities that are already drowning in unemployment will also face another rash of foreclosures.
These are just some of the factors that will affect your local market in 2010. Apply the ones that fit, as each market and micro-market will be different.
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