Home values have been declining during the 2009-2010 recession, interest rates have declined and most people in the United States have seen their equity decline. Will this trend continue into 2011?
The correct answer to this question is that prices will probably continue to decline in some markets and increase in others.The overall direction is slightly positive, but there are some “ifs and buts”.Most forecasters think we are in an unpredictable phase of the 2009-2010 recession. This recession did not affect all U.S. regions equally.
As a result of this doubt and uncertainty it is not a good time to apply for a home equity loan, and application for a new home loan is likely to be more challenging than it has been for the past several years. It is also a time when there is still some risk in the market, and also some opportunity.
The variation in home prices from region to region is very pronounced. For example, the average home listing price in New York, Massachusetts, Rh ode Island, Connecticut, New Jersey, California, Montana, Wyoming and Colorado – $429,000 and up. Compare this with Ohio and North Dakota at $184,000 average, with Michigan, Indiana, Mississippi, Iowa, Missouri, Oklahoma, Kansas, Nebraska, and South Dakota at $230,000 and below.
There are areas around Detroit, Michigan where entire neighborhoods are being leveled because the homes can’t be sold. But there are areas on the other side of the state where home sales have increased by 9%.
At present, U.S. home sales are off 18% from last year. At the worst end of the spectrum, the Midwest is off 27%. In the South prices have declined 13.3%.
Added to this troubling history is the somewhat hysterical debate about which political party has the right formula for improving the economy. Both parties will try everything within their power to stimulate growth in our economy this coming year. They will try to focus on “the peoples business” long enough to produce some useful legislation, and they are all afraid to get the blame for this recession. It seems that it is in both political party’s interest to improve employment, which will translate immediately into a stronger market for new homes. However, the debates during this November’s elections will probably stir up more fear, uncertainty and doubt: the infamous FUD factor. Right after the elections might be the time to act quickly. When the turmoil of public debate subsides the public’s confidence will probably improve. Christmas will cheer everyone up, and by next Spring we should be in a more optimistic mood as a nation. In short, the evidence and opinions seem to indicate that we shop now and buy later or make a very low offer.
It appears to be a good time to buy and perhaps not a very good time to sell. All cycles transform through this period. It is undoubtedly a time when people who want to buy and who can qualify for a mortgage should begin shopping carefully.