The crystal ball has been a little foggy lately. I was pretty much bang on the money for 2007 and 2008 but my predictions for 2009 were a little off. Primarily due to the massive government intervention in the market. I did not anticipate that level of interference in a free market. I really didn't know what to think about 2010 because of the uncertainty about what the government would do next. It seems like every time one program failed they would start another in 2009. In 2010 they pretty well just let everything expire and crossed their fingers and hoped for the best. Unfortunately without the government programs the market is slowing. The last quarters numbers are pretty convincing evidence that it is going to continue it's downward march. A slow and orderly decline would probably be tolerated but if things start to worsen we will probably see the government step in again. Heck, they already have stepped in again with the announcement that the fed is gonna buy more toxic crap. Other than another tax credit I'm not sure what they could do. Government sponsored low interest loans would probably be the best bet rather than another tax credit we can't afford.
My feeling for the IE is that our market will stay fairly stable. Currently prices have fallen to the point of affordability for most buyers. In many areas it's now cheaper to buy than it is to rent. Investors are busy purchasing rentals and the flippers are hard at work trying to pick them up cheap at the trustee sales. Unless the employment situation gets worse I think the market in the IE will be stable. One possible exception is the market over $500k. Tightening of the mortgage market makes getting loans over $417k harder and there's just not a lot of people that can qualify for homes in that price range out here. So I suspect the high end may fall a little bit. But I think the low to mid priced homes (up to $400k) will be stable.
There are some other factors that might effect out market. The new governor will undoubtedly raise our taxes one way or another. More taxes means less available income to purchase or pay for a home. The foreclosure crisis is not over. Many of the pick a pay loans are set to recast in the next year. The recasts will add another wave to the foreclosure crisis. The resets should not be affected since rates are still very low. And there is still a lot of uncertainty about how fast the banks are going to throw these homes onto the market. So far they have controlled the inventory levels of REO's very tightly. But it's anyone's guess what they will do if the market continues to decline. Personally I think the will continue to trickle them out.
I guess to summarize, I just see more of the same. We may see a slight dip in the median but if it happens it will be because of the high end of the market. I don't thin the low end or the middle of the price ranges will change. So lets here what you guys think.