Caution is the byword for 2010, with professionals across the residential real estate industry expressing only mild hopes for improvement in the markets this year, according to a recent Banker & Tradesman/Bannon & Co. reader survey.
Single-family homes are the bright spot in the residential sales outlook, with 57 percent of respondents forecasting a modest increase in sales. Readers’ expectations for condominiums and multi-family units were more subdued, with about a third of respondents expecting a modest increase in sales, while 41 percent of readers thought condo sales would remain about the same as 2009. Regarding multi-family sales, less than half (47 percent) felt they would remain roughly the same as last year.
Those moderate hopes for improvement in sales may have been influenced by reader’s views on foreclosures and the homebuyer’s tax credit.
Following two years of high foreclosure rates, 42 percent of readers said they think 2010 would see a further increase in foreclosures, while 31 percent think the high pace would stay about the same as last year. Only 27 percent believe a decrease is likely.
The homebuyer tax credit was intended to boost sales, but market observers disagree about how great its effect has been. Many members of the general public didn’t fully understand how the program worked, and many potential first-time buyers found themselves shut out of the market because of tightening credit standards, said Jaclynn Sulfaro, president of the Massachusetts Mortgage Assoc.
“When they extended the tax credit [through April], a lot of people backed off and said, ‘I’m going to wait until next year, property values may decline more,’” Sulfaro said. But, she added, the extension of the credit into this year to people who are not first-time buyers ought to help sales.
Readers viewed the impending expiration of the credit warily, with 60 percent saying it would have little effect on sales while almost 40 percent worry it will hurt sales dramatically.
REO A Drag On Prices
Even if sales rebound, prices may not. Almost two-thirds of readers think it “extremely” or “very” likely that banks will attempt to liquidate their portfolios of real estate owned (REO) property in coming months, with 71 percent of bankers themselves thinking it very likely banks will attempt to liquidate. A large number of REO properties coming onto the market could help keep prices low, even if sales continue to recover.
Aaron Gornstein, executive director of the Citizen’s Housing and Planning Administration, said that sentiment agrees with what he’s been hearing.
“In a lot of cases there were moratoriums [on foreclosure] in place through this spring, and it takes a fairly long time to get through the foreclosure process,” Gornstein told Banker & Tradesman. “We have a sense that we will see an increase,” in the amount of REOs on the market in 2010, he said.
CHAPA launched a program last July in which the group works to place qualified low- and moderate-income buyers into REO properties.
Gregory Vasil, CEO of the Greater Boston Real Estate Board, thinks the market is unlikely to see a sustained increase in prices until the fall, saying there was still a lot of inventory being held off the market by people who might be inclined to sell when prices bottom out.
Long-term, any housing recovery depends on jobs, Vasil said. He pointed out that the state has not returned to the same number of jobs following the two most recent recessions, and job growth ultimately prompts housing sales.
“Biotech is not enough to drive [this state’s] economy,” he said.
Taking a larger view, a slim majority of respondents said they expect moderate improvement in the state’s overall economic outlook in 2010, while 31 percent expect it will be about the same as 2009.
