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.
For the most part, changes in home prices tend to be determined by the inventory of homes available. There is typically a 6-10 month lag time in price changes. That is to say that if inventory increase, prices will decrease about 6-10 months later, and if there is a a decrease in inventory, prices will increase about 6-10 months later. Investors benefit because they can use low short sale prices to sell houses quickly before the rest of the inventory catches up.
As a general rule, prices will fall if there are 8 or more months of inventory available. They will rise if there are 2-3 months available. This is a solid rule to use for your market in 2010.
The First Time Homebuyer credit was not able to quench the demand for starter homes in many areas. If you are investing in one such market, the feeding frenzy for lower end homes may very well continue. Because the credit was extended and expanded to include all buyers, both sales and prices might increase because there is a larger inventory of homes available and many more buyers in the market. The impact of the tax credit should not be overstated, though. Of all people who bought homes last fall, only 6% said they did so because of the tax credit.
Gen Y’ers (1977-1994) are in their prime home-buying years. It will take a relatively small increase in demand to spark building in those parts of the country that generate jobs for this age group and have remained relatively stable during the recession.
Another factor that drives prices is cost of ownership. The U.S. Treasury will play a part in determining whether 2010 is naughty or nice to homeowners. The Federal Reserve showed little incentive to raise interest rates in 2009, but things may change in 2010. There may be pressure on the Fed to increase interest rates to attract more buyers of U.S. debt. Even a small increase in interest rates will drive potential home 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 some of the factors that will have an impact on home prices in your local market in 2010. Make sure to apply the ones that fit, because each market and micro-market will act differently this year.
Learn more about real estate investing. Stop by Bob Massey’s site to get your FREE copy of his ebook on how to find motivated sellers.
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