Jaffe predicts home sale activity may increase in 2010

Dr. Austin J. Jaffe, PAR's consulting economist (Photo credit: Stuart Leask)

The housing market remains troubled and it may be years before the market levels out, according to Dr. Austin Jaffe, PAR’s consulting economist.

Jaffe, who spoke at PAR’s Business Meetings on Monday, said, “The new real estate market will be dramatically different but we will not see quite as a dramatic difference in Pennsylvania.”

He said many consumers nationwide continue to have unrealistic expectations when it comes to home prices. “In a survey of homebuyers, consumers continued to expect a 24 percent annual price increase,” he said.

Nationwide the real estate market is seeing 14 percent of mortgages are delinquent and 25 percent of borrowers have negative equity in their homes, with extremes as high as 65 percent in Nevada, 48 percent in Arizona and 45 percent in Florida.

Jaffe made five predictions for the 2010 housing market:

• No growth is expected in home prices in Pennsylvania in most markets.
• While foreclosures in Pennsylvania are up, they have slowed down. However, expect an increase in foreclosures due to the option ARM adjustments in 2010 and continuing high unemployment.
• Sales activity may increase due to lower prices but not as much as if foreclosures remain a problem and unemployment remains high in Pennsylvania.
• Mortgage rates are headed upward and will continue to do so after “quantitative easing” is over and inflation returns. Credit will be very scarce for risky borrowers.
• The federal government will continue to be helpless in stemming the housing crisis. Attempts to write down delinquent mortgages will continue to not be successful.
• Housing will be viewed as consumption benefit with a long-lived, indivisible, undiversified, high transaction cost durable good in a world where tax policy and land use controls work against future buyers even if unemployment falls.

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This entry was posted on Thursday, January 28th, 2010 at 6:00 am and is filed under Economics, Industry News. You can follow any responses to this entry through the RSS 2.0 feed.