Foreclosures to Stay, Slight Improvement in Real Estate in 2010

Will 2010 spell better times for the housing industry? One does not know. As of now, the US is perhaps going through one of the most critical phases.

Unemployment is at its peak and people are faltering on mortgage payments. Hence, foreclosures have become common. The California Association of Realtors observes that 2010 will not be any different. Home prices will go up slightly and activity will be robust at lower ranges.

However, this is dependant on one major factor: the number of foreclosures will be more or less static. They won’t increase by leaps and bounds.

The association’s deputy chief economist, Robert Kleinhenz, says that the housing industry will be revived only if the volume of distressed properties does not increase. The revival of the real estate sector is also dependant on the unemployment scenario.

The Federal government has also given a stimulus package to help revive the housing industry. With this stimulus money, loans of homeowners will be modified. The government has also announced a tax credit of $8,000 to people who are buying homes for the first time.

However, that credit support will be taken off by November 30. Now the Association wants the credit line to be extended beyond November. The facility should be made available to all home buyers, argues the Association.

Kleinhenz says that it is very difficult to predict the number of foreclosures. Defaults have come thick and fast in the second and first half of the year but the number of foreclosures has remained steady. There has not been a significant increase in foreclosures.

Banks do not have a single formula to address defaulters. Some loans are being modified by them and not others. However, banks are not taking over the properties of defaulters. This could be because banks do not want to flood the market with foreclosed properties.

The founder of ForeclosureRadar, Sean O’Toole says that banks are hesitant to foreclose properties for one reason – they do not want to drive down property values further. Prices are low already and coupled with the low interest, this is the ideal time for buyers. In fact, bidding wars have become common which is definitely helping to stabilize prices further. In some areas, home prices have even increased.

The economists feel that California home prices will increase 3.3 per cent next year. The market will remain active in 2010 and gradually the real estate sector will improve.

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