Brighter Housing Outlook for 2009: Buyers Take Heed

Written by: Phoebe Chongchua / Realty Times

The continual drop of housing prices is expected to end but not before home prices slide a little more, according to a report by Moody's Economy. This news along with the tax credit for eligible homebuyers, and further mortgage rate declines could mean now is the right time to buy.

"If you want to buy a house and are expecting to stay in the property for a long time -- it's not an investment property but a home -- then now is probably not a bad time to be buying," says Chen, co-author and Senior Director of Housing Economics, Moody's Economy.

According to the study, home prices in 381 US metropolitan areas have dropped on average 25 percent and will slip some more (another 11 percent) before stabilizing. The hardest hit markets include areas in California, Arizona, Nevada, Massachusetts, Florida, New York, DC, Virginia, Maryland, and West Virginia.

"Our finding is that we do expect on a national level that the housing correction will bottom by the end of this year. By bottoming we mean that home prices will have reached the lowest level and we expect that between the peak of the housing market in 2006 to the bottom that [housing prices nationally] will have lost 36 percent of their value," says Celia Chen, co-author of the report.
The bright side is that the "housing correction" is in sight, according to Chen; and may, in fact, close in faster with the help of the economic stimulus package.

"Our outlook depends heavily on policy measures that will help to shore up the economy and also to help mitigate foreclosures that are occurring right now," says Chen.

Chen says she believes that the stimulus package could help pull the economy out of a recession this year and "will help stabilize jobs which is a positive for the housing market."

She also expects that, "The Fed and the Treasury will work hard to keep mortgage rates low and, in fact, we do expect mortgage rates to fall to about 4.5 percent by mid-year. That will also help bolster demand for housing," says Chen.

"There is going to be some sort of foreclosure mitigation program put in place that will help forestall some of the foreclosures from happening. That's not to say that all of the foreclosures will end. I think that we'll still see quite a number this year but, at least, it will be better than if there is no policy at all," says Chen.

She says without this help from the government, prices could fall "even further than what we're expecting."

The $789 billion economic stimulus plan aims to save and create 3.5 million jobs, pumping up consumer activity through spending programs, and tax relief efforts including a credit for homebuyers. (At the time of this writing, details are still being worked out but it appears the tax credit for eligible homebuyers will be around $8,000).

The National Association of Realtors predicts that the tax credit will stimulate an additional 200,000 home sales, according to reports by the Associated Press.

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