2009 REAL ESTATE FORECAST
Because forecasting the direction of the market is vital in pricing homes and advising buyers. a great deal of energy is spent trying to accurately forcecasting the coming year.So how did we do in 2008?
In 2007 we forecast a 3% decline in house prices for 2008. Several months later we revised our forecast downward calling for a 10 % decline. It appears once the final statistics are in that 2008 will register a 10-12% decline for the Seattle region. So we would give ourselves a B plus.
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So that brings us to 2009. We believe that the real estate market will suffer through another bleak year. The location of the property will be the single largest determiner of the level of price declines. Properties closer to the city core could see a 5% decrease while properties farther out will experience a 10% decline. Several major factors have led us to this forecast:
Number one: the employment situation is deteriorating. No jobs equal no income and no income makes buying homes difficult.To review unemployment you can visit the bureau of labor statistics. Please pay special attention to the U6 figures which represent a truer picture of unemployment. The U6 figure is now 13.5% unemployment. We expect unemployment based on U6 to approach 20% We do not expect a mid-year recovery and expect this recession to be long and protracted.
NUMBER TWO: Household wealth is declining at an unprecedented rate . People are looking to save money and purchasing a car or house will be less impulsive and more deliberate. This plunge in household net worth is virtually unprecedented and the lingering impact this is going to exert on household savings and spending patterns is going to be the big story of 2009. What the decline in asset values means is that households, which have already begun the process of saving more out of current income, will intensify those efforts – especially among the boomers who are nearing retirement age.
Number 3: Excessive inventory of homes. During the peak of the market we had a two month supply of homes. We are currently around eight months worth of supply. Until the supply of homes diminishes, housing prices will stay flat or fall. In the end it’s all about "supply and demand."
We would expect any recovery to occur no sooner than the second quarter of 2010. The amount of debt that is deleveraging is staggering, and only time will cure this problem.
Any stimulus from the government will be of minimal help and at best will only soften the blow. It is our belief that our country is entering a new era; an age of frugality in which people will live within their means. This new mindset may have a profound effect on real estate for decades to come.
We acknowledge that this report is not a "feel good forecast". This forecast is meant to help sellers price their properties in accordance with market conditions, as well as assist buyers in making prudent decisions. In the event the market stabilizes and starts to rebound we will ammend our forecast to reflect these changes.
Thanks for reading our report!