In our county, there are some bright spots within the housing market. The economic forecasting team at the Anderson Center on Orange, CA has predicted that housing prices will fall 6.7% in 2009; this is a much better outlook than the dismal 34.2% decline seen in 2007. Economist Esmael Adibi predicts that the current rate of decline will end in 2009, setting the stage for a solid recovery of the market in 2010. The head of the FDIC (Federal Deposit Insurance Corporation) predicts a "tough year" in 2009, but that the FDIC is preparing for it. She expects to begin to see light at the end of the tunnel by 2010.
These three predictions all point to either a bottoming-out or close to bottoming -out of the area market.
Local home prices are now reaching the point of affordability. It is becoming more cost-effective for qualified buyers to enter into the housing market.
On the downside, more subprime mortgages are expected to readjust in the coming year, creating the possibility of more home foreclosures. It is likely that Congress will enact legislation in the coming year to assist home owners in danger of foreclosure. This will not prevent all foreclosures from occurring, but will help to stabilize them, and help keep the inventory of available homes to a more controllable level.
Another growing problem is the current jobless rate, which grows larger by the day. The unemployment rate in the state of California reached 8.2% in October. As the jobless rate grows, foreclosures will likely increase, putting further downward pressure on home prices.
All this having been said, keep in mind historically-low interest rates, more affordable homes, additional mortgage modification assistance and smaller home inventories can be signaling factors that the area market is seeing some good news amidst all the bad.
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