Real Estate in 2010

Lisa Doyle

Is 2010 the year to buy a house? It certainly looks that way: After a steep run-up in prices during the first half of the decade, home values have plummeted back to 2003 levels. Fixed mortgage rates are sitting near record lows. And the foreclosure epidemic – while painful for many home owners – has created some wonderful opportunities for bargain hunters. If that is not enough, Uncle Sam is handing out thousands of dollars in tax credits to nearly all first-time buyers and the bulk of existing home owners who close a purchase by June 2010.

But while the 2010 outlook appears inviting, there is one key catch – you need to have a stable job. The economy is showing signs of life, but the unemployment rate is already at 10 percent and expected to go higher. And while those mortgage rates are attractive, buying a home makes sense only if you can bank on your income stream. Before you consider purchasing a home, take a hard look at your job, your company, and your industry.

With that said, here are 7 things to know about real estate in 2010:

1. Prices to bottom: After more than three years of falling, real estate values have shown signs of stabilization in recent months. This improvement will give way to a bottom in home prices, finally, in 2010, but not before some possible declines. Some real estate forecasters are projecting home prices to hit bottom in the third quarter of 2010.

2. Mortgage delinquencies up:Amid falling home prices and poor labor market, roughly 1 in every 7 mortgages was either past due or in foreclosure by the end of the third quarter in 2009 – the highest delinquency rate in the 37-year history of the Mortgage Bankers Association’s National Delinquency Survey. Two factors are expected to drive delinquencies even higher next year. First, nearly 1 in 4 homeowners currently owes more on their mortgage than the property is worth which increases their odds of default.  And secondly, the national unemployment rate – which already stands at 10 percent – will peak at about 10.5 percent in the first quarter of 2010. Additional job losses mean more borrowers wont be able to pay their mortgage bills.

3. Mortgage rates to rise: Anyone who purchased a home in 2009 was presented with some extremely attractive mortgage rates. Rates on 30-year, fixed mortgages fell to an average of 4.88 percent in November 2009, down sharply from 6.09 a year earlier. A key factor behind the plunge was a Federal Reserve program, first announced in November of 2008, which purchased debt and mortgage-backed securities from Fannie Mae and Freddie Mac. But the program was slated to expire at the end of the first quarter, and if private investors do not step up, fixed mortgage rates could jump (The Fed, of course, could always decide to extend the program). The unwinding of this Fed program, the improving economy, and mounting concern over government deficits could push rates on 30-year, fixed mortgages to roughly 5.5 percent by mid-2010 and close to 6 percent by the end of the year.

4. Buyer’s market remains: With prices still falling, mortgage rates remaining historically attractive, and additional homes hitting the market in the form of foreclosures, the dynamics of the real estate market will continue to favor buyers over sellers in 2010. That means those looking to buy a homje next year should not feel pressured to act impulsively. Buyers do not need to have a sense of urgency, but they do need to understand that as time progresses the balance of power, as we get into 2010, is going to slowly but surely shift back to the sellers. It is not going to be a strong seller’s market, but it will be more evenly distributed as the year goes on.

5. Modification plan could be modified: While the Obama administration has put nearly 700,000 borrowers into temporarily restructured mortgages, it had found permanent fixes for just 31,382 struggling homeowners through November 2009. What’s more, critics have identified two key shortcomings of the government’s $75 billion anti-foreclosure plan. First, the program is not much help for borrowers struggling to stay in their homes as a result of a job loss. At the same time, the plan does not sufficiently address the issue of negative equity – owing more on your home loan than the property is worth – which also works to increase foreclosures. The government may move next year to overhaul the modification program in two ways: improving troubled borrowers’ negative equity positions and helping to turn troubled homeowners into renters.

6. Tax credit available through June: On top of lower prices and cheap mortgage rates, Uncle Sam is offering an additional incentive to get buyers into the market next year. In early November 2009, President Obama signed a bill extending and expanding a popular tax perk for home buyers. The legislation gives qualified first-time home buyers a tax credit of up to $8,000 if they close the purchase of a primary residence by the end of June 2010. Meanwhile, qualified current home owners are eligible for a credit of up to $6,500 when they buy their next principal residence.

7. Markets will vary a great deal by region: The performance of the national housing market is much less important that the dynamics of your local market, and sales and pricing trends will vary a great deal from one area to the next in 2010. That means anyone interested in buying real estate next year should not just read the national headlines. Instead, consult a real estate professional with experience in that area. AWith their help you can obtain local pricing and inventory trends.

Put the "Dream" Back in your Dream Home

Remember how you felt when you first bought your home? It was a dream come true. Since then, you rdreams and needs have changed and maybe you are feeling it is time to move. Unfortunately, the real estate market is not cooperating and you face either selling at a loss, or not being able to sell at any price.

There is an alternative to letting the housing market get you down. Make the space you are in reflect your dreams by doing some target renovations to add luxury and utility. A great place to spice things up is in the kitchen.

The kitchen is typically the most important and busiest room in the house. A warm, beautiful and functional kitchen can have a major influence on how you and your family feel about your home and your lifestyle. And you do not have to break the bank to create a kitchen where you will love spending time.

Before you take the first step toward these changes, here are a few vital tips to help bring your dream kitchen to life and save precious time and money.

Planning – A kitchen remodel is a big investment, so know how much you are willing to (and can) spend by planning ahead on layout and design features. Keep in mind, hardware, paint and wall coverings can easily be updated later to reflect the latest trends. The big purchases like cabinetry, countertops and appliances are what you will want to live with for years. For instance, white is timeless and with stainless steel appliances – creates a look that will stay fresh for years.

Think about how you live – Your new kitchen design should reflect the way your family lives. How many people will be in the kitchen at one time? In addition to cooking will you use your kitchen for dining, entertaining or homework? does anyone in your family have special needs? Would lots of storage help your hectic life? Prepare an inspiration folder of ideas you have seen in magazines or digital pictures you have taken of elements you like. And, get the rest of the family involved in the choices.

Personal style – When selecting your kitchen cabinets, are you traditional, contemporary or somewhere in between? Before you head to your local home center, it is very helpful to know your style. Then you can create a unique, customized look just for you and your family. Think about what appeals to you – styles, finishes, colors, etc. From a practical standpoint, also review your priorities – your “must haves” – against your target budget.

Attention to detail – It is those beautiful details that allow your personality to shine in your new kitchen. For a custom look, consider adding decorative accents like molding build-ups, ornaments and corbels to cabinetry. Including decorative accessories such as hardware, glass door inserts and under-cabinet lighting can also make the room sparkle.

Take measurements – Be prepared with accurate measurements of your current space. Double, or even triple, check your work. You can download tools like grid paper from the Internet. Make sure your installer validates the dimensions or obtains professional measurements. This helps avoid measurement errors that can lead to costly delays or incorrect product orders.

For most families, the kitchen is really the heart and the pulse of their home. It is a great place to put the “dream” back in your dream home. Lisa Doyle

Costly Mistakes Sellers Make

There are always appropriate steps to investing in real estate. However, there are also inappropriate steps sellers can walk down when it comes time to put their house on the market. Work closely with your real estate professional to help avoid these costly mistakes:

Mistake 1: Putting the home on the market before it is ready. Most times this happens because the seller gets impatient or is a procrastinator and has pushed himself up against a moving deadline without getting the pre-sale work done. So it comes on the market with the horrible carpet (that gets replaced during the marketing of the home); or they are painting it while it goes on the market. Presentation is everything — so get the work done before marketing the property.

Mistake 2: Over improving the home for the neighborhood. This happens with additions, bump outs, and upgrades that make the home stick out from among its competitors so much that it is an anomaly, instead of a nice addition to the community.

Mistake 3: Pricing the home based on what the seller wants to net. This pricing strategy always ends in failure. Sellers can control the “asking” price, but they do not control the “sales” price. The market does. It does not matter what the seller wants, the price is determined by the black-and-white, matter-of-fact reality of the market.

Mistake 4: Getting emotionally involved in the sale of the home. This is one of the biggest challenges home sellers face when putting their house on the market. Once you decide to sell your house, it is no longer a home, but a commodity. It needs to be prepared as a commodity, marketed as a commodity, and priced as a commodity. It does not matter what you “want,” only what the market can bear on pricing. People are going to come in to kick the tires, so to speak, and you can not get emotional about how they may or may not appreciate the nuances of your home of seven years.

Mistake 5: Trying to cover up problems, or not disclosing them. Most states have a property disclosure/disclaimer form — use it wisely. Just because you disclaim does not mean you cannot be sued later for the leaky basement, or dilapidated heating/air system that is discovered 30 days after settlement.

Mistake 6: Not getting you ducks in a row before trying to sell. This would involve financing, reading the fine print on your current mortgage to ensure no pre-payment penalties, not listening to the particulars of your local market, etc. If your local market is dictating lower home prices then lower it early not later — it will cost you more. If the local market dictates selling your home first, then buying second, do it in that order, or vice versa.

Avoiding these mistakes is not that difficult. There are plenty of resources out there and your real estate professional can help you step over the pitfalls. Do the research early, and listen to all the professionals (finance, real estate, insurance) who bring their expertise to the table and help you avoid costly mistakes in the process.