A Review of 2009's Real Estate Market 

The real estate market in 2009 was the best of times and it was the worst of times.  Homebuyers took over a market filled with tax credits, record-low interest rates and under-priced homes, while many homeowners were forced into short sales or foreclosures. The market saw signs of recovery as well as setbacks, reminding us that it may be a long and bumpy road to recovery. Like the rest of the country, Philadelphia, Montgomery, Bucks, Chester and Delaware County’s real estate markets experienced a roller coaster of highs and lows in 2009.

Philadelphia and the surrounding counties were faced with numerous hardships this past year. Available homes spent 15% more time sitting idly on the market before selling and significantly fewer houses were sold in 2009 than 2008. This caused an abundance of inventory which lessened demand for houses on the market and drove prices down. Philadelphia and the surrounding counties saw a 7.5% drop in the average selling prices of houses in 2009. Montgomery County saw the most severe cut, with an average sold price that dropped from $325,000 to $298,000.  While these extremely low figures have troubled sellers and homeowners, buyers have had the chance to buy properties that would have been far beyond their budget in the housing boom of the early 2000s.

By the final quarter of 2009, the real estate market as a whole showed signs of recovering. Both the volume of units sold and the selling prices of homes increased and the average number of days that homes sat on the market lessened and turnover increased. These improving trends were also apparent in Philadelphia and he surrounding counties.

These 3rd and 4th quarter improvements were largely due to the First-Time Homebuyer Tax Credit. First-time homebuyers, who accounted for approximately 50% of November sales, raced to submit offers in order to make the November 31 deadline. Shortly after, a second bill was passed that not only extended the first-time homebuyer tax credit but added another credit for current homeowners.  This new tax credit offers current homeowners who are under agreement by April 30, 2010 a maximum of $6,500 in tax credits. 

These extensions and expansions of the tax credits have already generated significant activity in 2010. It is predicted that this trend will continue through April when the government aid will stop and incentives for consumers to buy and sell houses will diminish.

A concern for the 2010 real estate market is that it will be tainted with foreclosures. Three million homeowners received foreclosure notices in 2009, but many lenders had insufficient resources and were forced to postpone the process. These delayed foreclosures are expected to flood the market this year, which would be a headwind in the housing market’s recovery.  The drastically low price of foreclosure houses puts pressure on the rest of the market and causes home values to plummet. If banks neglect to price foreclosures carefully, the delicate market will experience even greater difficulty recovering. 

For anyone who has entertained the thought of purchasing a home, now is the time to buy.  Interest rates, which have been at record lows, are expected to creep back up in the second half of 2010. The Federal Reserve’s $1.5 trillion purchase of mortgage-backed securities, which offered much relief to mortgage purchasers over the past year, will end in March, also indicating that rates may increase.

The government has been making modifications to lending procedures in order to prevent this breakdown from occurring in the future. For example, the department of Housing and Urban Development issued a new standard Good Faith Estimate (A Good Faith Estimate is a form that is issued by lenders outlining fees associated with obtaining a mortgage).  In the past, Good Faith Estimates were distributed by lenders and mortgage companies in a variety of formats, making it challenging for consumers to compare and contrast terms.  The new standard form that is now required will describe fees and terms in a clear, simple, and consistent manner, allowing consumers to easily shop around for the best terms and rates.  HUD estimates that the average homebuyer will save $700 at the closing table with this new standard form.

The real estate market for the upcoming year looks as though it will remain shaky ground.  However, for those looking to purchase a new home, the market has never been better.   The tax credit for all buyers, low home prices, and marked improvements in mortgage documents are all encouraging for the homebuyer. 

2009 was a challenging year to say the least, but, the future of the real estate market in our local area looks good.  January of 2010 has already shown good signs of increased buyer activity and listing sales.  My business has flourished recently with multiple buyer and listing sales.  I look forward to servicing your real estate needs in 2010.  As always, feel free to contact  me if you have any real estate questions. Thank you for your continued support!