2009 Housing Market Preview: Good Deals, Low Rates and the Road to Recovery

The image of millions of people around the world celebrating the Inauguration of Barack Obama is a cause for hope. However, as President Obama stated in his bracing address, there are many challenges – and a great deal of hard work – ahead of us. Principal among those challenges is the U.S. economy, and central to our nation’s economic challenges is the housing market.

Here is our summary of a few housing market trends to watch out in 2009.

• The National Association of Realtors predicts that home sales nationally will increase by six percent in 2009, from 5 million to 5.3 million. This is a modest increase, but suggests that in many areas, the market has bottomed out, and will begin its climb towards recovery.
• The volume of new home sales is expected to continue to drop. In many cases, this may be a good thing, because it will gradually reduce the volume of inventory that has resulted from overbuilding within the market.
• Prices have dropped nationally about 12 percent from their peak in 2006. This spells trouble for sellers with little equity in their homes, but as the market levels out, sellers with equity should remain in a relatively stable position.
• The affordability index across the country has increased dramatically. A higher percentage of people with solid income and good credit should qualify to purchase a home, when compared with the market peak in 2005-2006. This is also good news for deal hunters. Savvy buyers will seek opportunities within the market – namely, they will take advantage of price drops from motivated sellers in desirable areas. In some cases, they may even be able to purchase a home for less than its appraised value.
• Low interest rates mean that buyers with solid income and good credit can save thousands of dollars and get a great deal on a home loan. Rates are still hovering around 5%, down from over 6% just a few months ago. Meanwhile, FHA loans require as little as 3.5 percent down.

The wild card in 2009 is government intervention. What will the Obama administration do to help speed the housing market recovery, assist troubled homeowners, and spur home sales? Obama and his advisors have spoken of greater intervention – this could help to further stabilize the market.