American Bankers Association Reports Bank card delinquencies rose to a record 5.01 percent of all accounts. For home equity loans, 4.01 percent of accounts were delinquent, while 1.92 percent of home equity lines of credit were delinquent.
Okay, I’m going to do something I normally avoid; I’m going out on a limb and publicize my housing predictions for 2010. While I occasionally discuss general trends and opinions about the market, I think it’s important for all of us to have as much information as possible in order to properly plan our futures. And while this is only my opinion, after all, it’s the only one I can offer; it’s based on 4 decades of experience combined with careful observations of current trends and conditions. Here is what I see the future of housing:
I think the Fed will throw everything in it’s arsenal towards keeping interest rates low throughout 2010. To do otherwise would be to sabotage an economy that has been both erratic and unstable, and would prove fatal in an election year. Though the government will prefer to fight looming inflation, doing so would simply cause the economy to nosedive; and I doubt they’ll be willing to take that risk.
While it may appear that home prices have stabilized, my guess is, they have not. I predict we’ll continue to see overall prices remain at their current levels and, in some areas, to decline well into next year. Foreclosures and short-sales will keep pressure on home prices for another 2 – 4 years. I cannot foresee how we can possibly have a significant resurgence in prices for at least 5 years, with prices not returning to 2005/2006 levels for a decade or more.
Foreclosures and short-sales will make up as much as 40% of total sales for the next 30 – 36 months. And the percentage could possibly be greater, depending upon how eager banks will be to put their inventory on the market. Their preference will be to pace their release to keep prices from plummeting, but the sheer numbers may make that impossible for some banks. Even after the supply begins to dwindle, the effect upon home prices will continue for at least another year.
Unless the government passes a major and all-inclusive tax credit, sales must remain sluggish. I don’t expect another housing incentive. There is little public support for throwing more billions at the problem, knowing that whatever increase might be realized, the benefit would be limited, temporary, and far too expensive.
By spring of 2012 interest rates will rise sufficiently to negatively impact home sales. While this is not the path that politicians would prefer, approaching a presidential election, it will be necessary to keep us from unbridled inflation. This potential scenario supports the premise for a continuing housing slump, extending into the following year and beyond.
Finally, the mid-term election will be both chaotic and unsettling. Both political parties will pull out the stops as never before, one attempting to hold on to past gains, and the other to regain past losses; and they will spend more money, make more promises, and sling more mud than ever before. Political maneuvering in the coming year will certainly impact both the housing market and the economy, but it’s impossible to know what politicians are willing to do in order to maintain or gain power. While they would like for us to believe that their plans can restore the economy, there’s little remaining in their arsenal that can have a significant impact.
While many will view these predictions as meaningless negative claptrap, my intention is to share what I both see and believe to be true. If I am able to help one person make a more prudent choice, then my efforts will have been worthwhile. Take this with the proverbial “grain of salt,” but if it proves beneficial, we’ve both gained in the process.
The Housing Guru: The one source for all your housing questions
Before taking a short sale listing, every Realtor (and Broker) should consider the following 7 questions:
- Have you as the Realtor asked the Client if the Client has consulted with their accountant or tax advisor on the issues of capital gains (and losses if nonresidential property) and debt forgiveness?
- Have you as the Realtor asked the Client if the Client has discussed with their accountant or tax advisor the tax consequences to the Client of the short sale?
- Have you as the Realtor considered (or consulted with their Broker) whether the failure of the Realtor to ask the foregoing questions before taking the listing could result in adverse consequences to the Client for which there may be unintended consequences and possible liability to the Realtor (and Broker)?
- Have you as the Realtor asked the Client if they have consulted with a Financial Lawyer (a bankruptcy lawyer) about how a short sale may impact other financial planning decisions, including minimizing or eliminating the tax consequences identified by the accountant or tax advisor?
- Have you as the Realtor asked the Client if the Financial Lawyer has discussed bankruptcy as part of an overall financial restructuring in which the short sale is part?
- Have you as the Realtor discussed with the Financial Lawyer the timing of a short sale and a possible bankruptcy filing. A short sale that precedes a bankruptcy filing may adversely impact whether a Client qualifies for relief under Chapter 7. If the short sale takes place before a bankruptcy filing in some jurisdictions it could result in a Client "failing" the Means Test, and therefore qualifying only for a Chapter 13; a much more rigorous, costly and onerous alternative to Chapter 7 relief?
- Have you as the Realtor considered (or consulted with their Broker) whether the failure to include a Financial Lawyer (a bankruptcy lawyer) in the process and failure to have considered the adverse impact on whether the Client can get relief under Chapter 7 may give rise to liability for the Realtor (and Broker)?
