Predicting the future is tricky. At best it’s two parts knowledge and one part luck. If there’s one prediction everyone wants, it’s what markets will be doing in the future.
Are we there yet?— Home prices won't hit bottom until early 2010. Some say it's really just a question of absorbing the supply of vacant properties. Home prices at the national level are expected to fall another 5 to 10 percent before stabilizing.
Tax credit—Exiting home sales rose again in November as first-time buyers rushed to close sales before the original November 30th deadline for the recently extended and expanded tax credit, according to the National Association of Realtors. NAR Chief Economist, Lawrence Yun, says the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”
Mortgage rates—It is predicted that rates will begin inching up to 5.28 in the first quarter of 2010 and hitting 5.50 percent in the following quarter.
Investor activity— By looking farther ahead than next quarter’s earnings, commercial real estate companies can plan strategically to ensure success. The good news is that relatively stable cap rates and strong capital flows should keep prices up, at least for the next couple of years. Some say that for the first time in a long time, real estate is priced right relative to interest rates.
After a quiet year of investment sales, buyers are preparing to forge ahead with acquisitions in 2010. Two thirds of investors (65%) who responded to the 6th Annual Investment Survey plan to boost their investment in commercial real estate over the next 12 months.
It is clear that investors want to pursue new acquisitions. Overall, 72% of respondents indicate that they are currently amassing capital in preparation for buying opportunities.
Economic recovery—One of the few people who saw the US economic crisis coming, International Institute of Management President Med Yones, is now predicting that the economy will begin to recover in 2010.
The IIM is not a fan of expensive stimulus packages. It instead favors job creation through funding for small businesses, “The most cost effective and quickest method to stimulate the U.S. economy is to support job creation through US small businesses and innovation development. U.S. Census Bureau statistics show that 98 percent of all U.S. firms have less than 100 employees. These 27 million small businesses create over 85 percent of all new jobs and employ over 56 percent of all private sector workers. The main focus of development programs should be innovation development, export and employment support. This solution would be a much less burden on the taxpayers; it can be implemented without too much new legislation, and would have a much faster positive impact on the economy.” Information sources: Politicususa.com, Realtors Commercial Alliance, and Realtor.org