It has become tradition to take out my crystal ball at the beginning of each year and try to foresee the future, but also re-cap my previous year’s market projections. New to this year, however, I hope you too will share your own market opinions through an on-line survey (see below). Enjoy my market guesses for what they are (guesses!), and I will look forward to hearing yours.
As always, I simplify my housing market forecasts into 3 categories: supply, demand, and interest rates.
‘08 Projection: “I expect only homeowners who must sell their homes will be trying to do so in 2008, which will help prices stabilize by the end of the year.
‘08 Result: In Sacramento County, the median home price fell $100,000 to a new decade-low of $180,000. But, during the 1st half of the year they fell markedly faster than the 2nd half of 2008, showing a slow-down of price drops. From September to December, the median home price fell less than $15,000. Additionally, there were 28% fewer homes up for sale in Dec. 2008 compared to Dec. 2007.
’09 Projection: Supply will remain low until April because many banks opted to not foreclose on properties during December and January. Once those back-logged repossessed homes hit the market in the spring Sacramento will likely see a large number of homes for sale. If I had to guess, the number of homes for sale will roller-coaster up and down throughout the year, and end up close to it’s current level.
‘08 Projection: “Buyer demand will…strengthen…as buyers get off the sidelines and pounce on amazing deals the Sacramento region has not seen since 2003.
‘08 Result: Contrary to main-stream media, gobs of Sacramento home shoppers bought in 2008. According to the Sacramento Association of REALTORS, 81% more homes were bought in 2008 compared to 2007. Most of these homes were at the entry-level price ranges (which largely contributed to the big fall of the median home price). First-time home buyers and investors alike found many affordable homes with monthly mortgage payments comparable to a monthly rent payments.
’09 Projection: While the global economic crisis has raised fears as to whether home prices will continue to fall, I believe low prices, low interest rates, and tax incentives will keep entry-level buyers extremely active in 2009.
‘08 Projection: “Mortgage rates will be incredibly low…as the economy will slow further…with sluggish employment and consumer spending figures.”
‘08 Result: Mortgage rates ended 2008 at ridiculously low levels, with 30 year fixed mortgages below 5%. Most zero and low down-payment programs went away last year, leaving only well-qualified borrowers with these super-low rates.
’09 Projection: With continued government intervention, mortgage rates will remain well below 6% for the year. Lending guidelines will remain tight, but those able to qualify will have unbelievable refinance and home buying opportunities.
Looking back, my crystal ball was working fairly well in 2008. As our economic challenges widen and government interventions heighten, the housing market will be increasingly dynamic and unpredictable. Nevertheless, it’s fun to predict and I would love to hear your market predications. Fill out this brief survey, and I will compile and share the results of these surveys with you next month.