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2009 Predictions for the Housing Market

Danielle Babb |

Happy New Year to you all and thank you for all you do to make our country great. You are all so appreciated.

I’ve been asked write up a 2009 housing prediction, but this is nearly impossible to do with significant accuracy. But, I’ll take out the crystal ball and do my best so you can know what this housing expert thinks will happen in 2009.

1.) The housing credit crunch will continue until regulators/government put more pressure on banks to lend the money given to them instead of hoarding it. Where did our taxpayers’ money go when we gave it to the banks? They’re saving it for a rainy day instead of lending it to you and me. I think you can expect the government to persuade banks to start lending in mid-2009.

2.) Mortgages will remain very cheap all year. Expect to see a conventional 30-year fixed rate hover around 5.25 percent. However, jumbo mortgage markets continue to be almost 2 percentage points higher. I expect this will remain throughout all of 2009 — making the price of the house plus the price of the mortgage ridiculously inexpensive.

3) Down payments will be high. Expect 20 percent if you’re not going the FHA route, and factor in the declining market value (what the bank guesses your house will drop in value in, say, 2 years), plus six to 12 months in reserves (your mortgage payment multiplied by six or by 12).

4) First-time home buyers will have it made in 2009. FHA loans require about 3 percent down and are super cheap — great time for first-time buyers to get in.

5) Foreclosures will increase. We will probably lose another million homes to foreclosure. New change alert: Due to bank modifications, 50 percent will redefault, lowering the rate of foreclosure. However, jumbo market owners aren’t able to refinance and there will be a new wave of foreclosures in jumbos with people that have good credit. 1 in 488 homes might drop to one in 400 homes or so by the end of 2009 in foreclosure.

6) New fraud. Big time fraud being ignored by the government, and will become more obvious in 09 in the FHA area. Be careful if someone tells you that you qualify for an FHA mortgage. I’d get a second opinion.

7) Prices. Prices will continue to remain stable in most markets that already had stability, but we will see them continue to drop in jumbo market areas, and areas already inundated with foreclosures such as California, Nevada, Florida, and Michigan.

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