When will we see 2007 prices and sales volume?

Many experts say a return to 2007 prices isn't likely in the foreseeable future. Given the unique and artificial conditions that fueled the well beyond inflationary two year run-up, repeating that level is not likely.

Since many under-qualified buyers were placed in risky mortgages (due in part to the poor performance of the stock market for investors), a bad situation of unsustainable growth occurred that had to result in disaster for many caught in the down slide when prices corrected.

After all the pain, we now have numerous lending controls in place to limit loose risky mortgages and home purchases to only truly qualified buyers, Therefore any repeat of wholesale flipping and associated price spirals is very unlikely to return.

On the bright side, many economists believe that a return to a normal 4-5% per year appreciation may be not far off.

Historically properties have on average risen around 4% since WWII. This alone would suggest that when the current correction is complete we will once again be able to plan our real estate portfolios with some degree of confidence.

Home sales up 11% in 2010 good and bad

Sales of existing homes will rise 11 percent in 2010, and sales of new homes will climb 21 percent over this year, Mortgage Bankers Association Chief Economist Jay Brinkmann predicted in a speech Tuesday at the organization’s annual meeting.

"We still see a concentration in the lower end of the market," Brinkmann said. "The entry level homes are in demand."

Brinkmann also predicted further declines in existing home prices, with the median falling to $164,200 in the first quarter of 2010.

David Stevens, commissioner of the Federal Housing Administration, concurred, adding that mortgage rates will rise to 5.6 percent by the end of 2010, though not enough of an increase to discourage a 12 percent increase in mortgage applications next year.

Source: Associated Press, Alex Veiga (10/13/2009)

2010 looks better

Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.

Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.

More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.

Source: Associated Press, Mae Anderson (10/12/2009)

FHA, helping with housing recovery

FHA Commissioner David Stevens defends the agency's role in the housing recovery, noting that the it continues to hold more than $30 billion in reserve funds and is insuring more lower-risk borrowers.

In a letter to the editor, in response to the Sept. 29 editorial "Subprime Uncle Sam," Stevens calls the piece's comparison of FHA to the subprime market "misleading" because the FHA's serious delinquencies are a third of those in the subprime market.

He adds that declining home prices will not trigger a loss of $100 billion for taxpayers because the FHA did little business in states like Arizona, California, Florida, and Nevada; nor will it lead to congressional action.

Source: Wall Street Journal, David Stevens (10/07/09)