What to expect in 2010

If we had all the answers, we probably would have already won the lottery by now. The OC Register real estate blog recently completed its yearly survey of professional real estate opinions, so you can check it out to see what they're thinking. Here are a couple of our thoughts on what we will be watching in the New Year:

• New home building in South OC...not too much new home construction in 2010, but it will be interesting to see how many buyers are out there this year looking to buy new. Talega, Glenwood in Aliso Viejo and San Joaquin Hills in Laguna Niguel are the major developments adding to the new home stock right now. New home builder prices continued their fall in early 2009, but have been flat/ever so slightly up for new phases in later 2009. We will be interested to see what happens once the tax credit expires - will builders slash $8 grand off prices right away, or will they first wait to see if the market supports higher prices before reluctantly reducing them? And what about increased interest rates we're being promised later this year?
  
  
• Median prices ... anybody's guess. These could be up in 2010, flat or slightly down. Either way you look at it, it won't signal a healthy housing market if the economy does not improve and people have jobs. Though we will be watching median prices and how many houses are sold, we will be looking instead to the types of sales (distressed or "regular") and studying the economic picture for OC and Southern California to see what's going on.
  
  
• Foreclosure pipeline will also determine the market in 2010. In 2009, there were lots of foreclosures. Those foreclosures were taken off the market fairly quickly by investors/buyers. We know there will be more foreclosures in 2010, so it will be interesting to see if the market continues to absorb the additional inevitable inventory. We'll also be watching to see if it's easier to complete short sales this year. If it is, this will help properties turn over quicker, though banks will be taking some huge hits.
  
  
• Buying a house? Look at long-term fundamentals and do the math. As we've demonstrated and will be demonstrating again in the new year, certain properties in South OC are starting to make sense financially under certain circumstances. If you're in the market for a house, check the comps, do your homework to understand fair value based on fundamentals, including comparable rental price. Understand that just about anything in your house can be changed except the location (of course, some things can be changed a lot easier and cheaper than others, so factor price into your decision) so do not get caught up with things like paint colors and carpeting. DO NOT get overly caught up with emotions either, make sure you're comfortable with your decision AND plan out worst-case circumstances to ensure you're prepared.

In short ... it's going to be a telling year for housing locally. The "main street" attitude is that the market has bottomed, but significant government intervention makes insightful analysis much more difficult. We find it hard to believe that the RE market is deep into recovery mode given personal incomes are down or at least flat, jobs are harder to come by and the local economy is scarred. One thing we can say for certain is that 2010 is going to be one heck of an interesting year. Here's to hoping the year is a better one than 2009 for everyone.