2008 Real Estate Market Predictions

By M Siddique

With the market slump heard round the world, 2007 is quickly winding to a close. Many are wondering where 2008 will take us. Based on real estate facts and trends from 2007, here are some real estate buying and selling predictions for next year.

Home Prices Will Decline and Stabilize - Home prices will continue to decrease in cooling markets. They won't freefall, though they will teeter back in forth looking for some solid ground.
Increases in Short Sales & Foreclosures - As interest rates on 3-year and 5-year Adjustable Rate Mortgages begin adjusting and those who used 100% financing in 2005, will start losing their homes. Many banks will probably refuse to negotiate short sales, eventually leading to a flood of bank-owned properties to hit the market.

Interest Rates Will Stabilize - Rates will move forward and backward within one-quarter point, and buyers will want fixed-rate mortgages. Buyers who cannot qualify for conventional loans will lean toward seller-financed instruments such as land contracts or lease option purchases.

A Buyers Market Will Entice Investors to Enter the Market - Investor's different criteria than traditional home buyers will encourage their return to the market as they recognize that a buyer's market is an excellent time to purchase real estate. First-time home buyers will find themselves competing with all-cash investors, and the investors will win.
Industry Related Businesses Will Not Survive - Everyone from mortgage companies, appraisers, real estate agents to builders, construction companies, and title companies will have to compensate somehow for the sluggish real estate markets of 2006 and 2007. Some won't survive.

Lowball Offers Will be Everywhere - Newbie buyers will figure out it is a buyer's market and start to write lowball offers like their going out of style. Many buyers will be writing insultingly low offers. Sellers should expect to receive lowball offers initially from many more buyers.

Inventory Will Increase Then Drop Significantly - As 2008 rolls around, sellers whose listings expired in 2007 will put their homes back on the market as a new listing. However, nobody will be fooled. Inventory will continue to increase until summer, when sellers will begin to realize they must either remove their home from the market or be reasonable. Most will choose to remove their homes from active status and inventory will finally begin to fall.
Banks Will Refuse to Pay Closing Costs - Banks are sick of taking it in the shorts. With agents trying to cram short sales down their throats and no one bidding at the trustee's sales, it will leave them stuck with unwanted inventory. Banks will probably start demanding bulk discount rates from title and escrow companies. They will also stop paying some regular closing costs like city taxes and state documentary transfer tax.

Flood Insurance Rates Will Rise - New assessments of flood risk will probably lead the federal government to redraw flood maps, requiring more home owners to carry flood insurance. Home owners with flood insurance policies could see rates double, while those who have no flood insurance could face paying rates that are 10 times higher than they would have paid under the old risk maps.

Siddique is real estate investor for over 22 years and President of http://www.butterflylister.com
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