After three years of pain, the housing market appears to at last be on the mend.
The California Association of Realtors is projecting a median price increase of 3.3% in 2010. This would have looked anemic just a few years ago, but comes as welcome news to homeowners who have watched their finances – and, in many cases, their lives – turned upside down by collapsing values.
The National Association of Realtors predicts the number of home sales to increase by 13.6% percent in 2010 – fueled, in part, by a rosy forecast for interest rates, which the association sees remaining low through 2010.
At Intero, our view of the Northern California market is not much different. We expect to see continued vitality in the first-time homebuyer market, which accounts for nearly half of all volume. The expansion and extension of the homebuyer tax credit combined with an extremely favorable interest rate environment will see to that.
Vital signs improve in the move-up market
But the key to any housing recovery over my more than three decades in this business has been the “move-up market.” Until those who sell to all those first time buyers in turn move up, the market remains tepid. In 2009, we saw few signs of improvement here due to the huge number of bank owned properties. These properties are not owned by people who move up – they are owned by institutions purging bad assets. You see the problem.
While we do not see this changing dramatically in 2010, we do expect the move-up market (and, in time, the luxury market) to show signs of life for three reasons:
- The expansion of the home buyer tax credit beyond first-timers
- The middle and upper segments of the market offer prices that are still dramatically lower then their 2005 highs (as opposed to the entry-level market, where prices have already risen from their bottom and multiple-offer scenarios are now commonplace)
- The relative strength of the tech sector in Northern California will continue to increase as the economy recovers, fueling demand in the upper strata of the market
Are happy days here again?
Surely, things are looking better heading into 2010 than they have in a long time. While the twin specters of unemployment and foreclosure will continue to exact a toll, it will be less severe. We are moving to a normal market.
But here is my caveat: Normal is not what we experienced in the 2001-2005 bubble. Do not expect credit to become as easy to obtain as it was (and may some of the more “creative” loan products from those days rest in peace!) and do not expect home values to snowball at reality-defying rates.
Those days are gone, at least for now.
But if you want to find a place to live at a reasonable price, if you seek to sell into a market with a strengthening level of demand, and if you believe in the undeniable value of real estate as a long-term investment … well, 2010 may just be your year.