The Urban Land Institute’s 2010 “Housing In America: The Next Decade”
February 20, 2010 by Jim Walberg · Leave a Comment
It is important for all of us to deal with reality in the midst of one of the biggest housing crisis in decades. You know I am looking for ways to make lemonade out of lemons in all aspects of my life. So, I don’t know how I missed this very important report regarding the 2010 predictions outlined in Ronald Terwilliger’s research paper Housing in America: The Next Decade. The report was presented at the January 26, 2010 meeting of the Urban Land Institute Trustee meeting. One of the key authors was Ronald Terwilliger – the chairperson of the Urban Land Institute. There are many different aspects of the report you will want to read so take some time to do so. Mr. Terwilliger writes about two major hurdles the 2010 housing market is experiencing in 2010. Here is a brief review of both points.
- PRICING: Mr. Terwillinger states the biggest obstacle to stabilizing home prices is the threat of a new wave of foreclosures. In 2008, more than 1.7 million homes were foreclosed or lost by short sale or deed in lieu. Another two million were lost last year and Moody’s Economy.com projects 2.4 million to be lost in 2010 and this may be a conservative estimate. Every time prices decrease, more homeowners see themselves in the position of being ‘underwater’ on their mortgage. Many studies have shown that once a homeowner reaches that point, they are more apt to ‘walk away’ from the home and the mortgage. This leads to more foreclosures, which leads to more price reductions, which leads to more people being ‘underwater’. And the foreclosure cycle continues.
Mr. Terwilliger’s opinion is that the number of homes ‘underwater’ is the biggest hurdle of our housing crisis. There were 48.4 million homes that had a mortgage in 2005. Estimates of how many of these homes currently are ‘underwater’ vary from 12 to 16 million, over one in four. Deutsche Bank Securities projects that 21 million U.S. households will be ‘underwater’ by the end of 2010 meaning that over 40% of mortgaged homes would be at risk. This could double the mortgage defaults from 2009 if only one “underwater” homeowner in five decides to walk from their home and mortgage. Prices are going to continue to fall this year in many of our micro-markets, especially in the $1 million to $2 million price points.
- OUR BROKEN HOME MORTGAGE LENDING SYSTEM: Realistically, all funds supplied to the residential market today are the direct result of federal subsidies. All new mortgages today are being bought or reviewed by the federal government. Private investors have completely exited the market absent a federal guarantee. What was once considered the world’s most efficient housing finance system, attracting trillions of dollars of investment from around the world, is now shunned by all, both here and abroad. And, remember that the Feds are exiting the mortgage markets on March 31, 2010. Interest rates will need to go up in order to entice investors back into the home lending markets. These factors are keys to the concern of when the housing recovery will actually take hold. It does not appear it will be in 2010.
And, there are still opportunities for those who are paying attention to the continued trend down in pricing and the upward trend in home foreclosures. Here are three key opportunities for Buyers and Sellers to consider.
- Buyers can purchase their dream home at rock bottom prices and get historically low interest rates.
- It is a great time for Sellers to move-up to the house they always wished for, again with very low interest rates. They may not have this opportunity again for years.
- More than ever, families need professional and patient Realtors and mortgage brokers to help them manage through the very difficult maze of this housing crisis. There are always opportunities and solutions during a crisis. It is critical to be able to find them.
Contact me TODAY if I can be of any service to your real estate needs. Until next time…your East Bay real estate detective remains on duty!
Related posts:
- East Bay Real Estate: Some Housing Recovery Solutions!
- 2010 East Bay Real Estate Update: Smart Sellers Are On The Market NOW!
- 2010 East Bay Real Estate Update: Challenges Facing $1 Million+ Buyer/Sellers
Filed Under: Blog, Buyers, Featured Posts, News, Real Estate, Sellers
Tagged: deutsche bank, Housing In America-The Next Decade, J. Ronald Terwilliger, Jim Walberg, Moodys Economy, Urban Land Institute
