What will 2010 look like in Real Estate?
Posted by bwpalm on January 13, 2010
Residential Real Estate - Residential overall will see prices stabilization and slow to a low rate of decline of 5% below current levels. But that really does not tell what is going to be going on so to break that out a little bit:
Housing under 300K will probably see the most stability and least amount of decline in value of probably no more than 5%. Housing in the 300K to 650K will more than likely have a slow decline all year and will be down 10% by the end of the year. The hardest hit sector will be 650K to 3 million where we expect to see another 30% drop in value, at a minimum, in this range of home values. This range has the largest inventory and still has a high number of people trying to downgrade their homes. In addition there is very little lending at this level. Housing over $3 million will be relatively untouched in 2010.
Unfortunately what these numbers do not talk about is the price you will pay for housing on a per square foot basis which will continue to decline at a slow and steady rate all year long. So while housing prices appear to be stable you will continue to get more house for you dollar
Now with all that being said there are still people who feel like there is great value destruction out there. As owners of real estate having to sell they will be unrealistic on how much value is actually gone.Thus homeowners will continue to list too high and feel like they are losing more.
Residential also has several variables that could still cause problems. First would be a rise in interest rates, followed with FHA raising the amount of a down payment, and rising taxes all of which will force prices down. But the biggest question out there is what is going to happen with Fannie Mae and Freddie Mac?
Commercial Real Estate - This is the one area of real estate that everyone agrees is going to be ugly as far as value destruction. You will more than likely see a large portion of real estate change hands over the next several years. One of the biggest things that you will see in commercial real estate is a clear division between real estate professionals and real estate amateur hour. As one of the biggest mistakes seen is amateurs not calculating any risk into properties. You will also see a lot of very difficult deals not due to real estate owners but due to lenders not wanting to take the loss.
With all of that being said every property is different and there are a ton of great deals out there.
