Real estate's 'fear factor' waning?

While most housing analysts believe there will be no double-dip recession, the number of foreclosures will continue to hound the industry in 2010.

"The only guys predicting a double-dip recession are guys who want to make a name for themselves," said John Tuccillo, national residential consultant and the former chief economist of the National Association of Realtors.

"If they can call this one right, everybody will remember them. But, in reality, it will be a long, grinding, slow recovery. Banks are sitting on too much cash now for a double dip, and I don't think most people see that happening."

Lawrence Yun, the present NAR economist, expects the $8,000 first-time homebuyer credit extension to continue to stimulate the lower end of the market, influencing the entire housing ladder. As more first-timers move in, others move up.

About 47 percent of all home sales in 2009 involved first-timers, up from 41 percent in 2008 and 36 percent in 2006. Yun believes that number will continue to rise because of an estimated 16 million renter households making enough money to qualify to buy homes. Demand should remain strong in 2010 and restore confidence for all potential buyers.

"I don't think the fear factor will be at play in 2010," Yun said. "We're seeing price stabilization on a month-to-month basis."

Yun's numbers show the pool of first-time buyers is 5 million more than in 2000, and thus represents pent-up demand. In his opinion, if the credit continues to have the same impact on demand in 2010, overall house prices will rise 3-5 percent this year and sales will be up "conservatively" 15 percent.

It remains to be seen if the first-time homebuyer program -- plus the new $6,500 credit for existing homeowners -- will generate enough energy to eliminate the fear factor this year. People simply postpone a buying decision if they believe home prices will continue to go down.

The stewing pot is the number of foreclosures heading to the market. Some lenders, deluged with active foreclosures, are way behind with some borrowers who are 16-20 months behind in their payments. These properties have yet to hit the market as foreclosures. Yun predicts 2.2 million foreclosures this year; RE/MAX Real Estate is anticipating approximately 5 million, while another study suggests 7 million. ...CONTINUED

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.