Well, we made it through 2010 – a good year for some, a bad year for others in the housing industry. Some lucky home buyers were able to secure a house at rock-bottom interest rates, lower-than-average prices and with a nice home buyer tax credit to boot. But some unlucky sellers had to sell at a loss or worse, foreclose or even walk away. What's in store for 2011? I've already discussed my market predictions here. What I want to get into in this post is more the things outside of housing that will play a key role in how we end the year.
1. Federal deficit: As the deficit problems loom, the administration rightly goes looking for places to find more cash to put on the books. In 2010, we saw some talk about big reductions in the mortgage-interest deduction – one of the most often talked about incentives for buying a home, and also a big cash cow for potential tax revenue if reduced or eliminated altogether.
As I've said before, this type of change will not happen quietly nor without a fight. But I'm guessing we will see more discussion as Congress looks for ways to fix our budget woes.
2. Jobs: Yes, this is obvious, but it is worth mentioning yet again. Without a solid job outlook, housing markets will suffer. It's difficult to sign for a mortgage when you're unsure of your job security or worse – unemployed! Any good news on the job front will bode well for real estate markets so watch this issue closely for clues.
3. Lending regulations: The Obama administration doesn't seem to be finished looking at more regulations for the lending industry. In fact, one of the first things on the agenda this year is to look at how to restructure Fannie Mae and Freddie Mac. Regulators are also looking at rules about how banks must retain some of the risk when selling off mortgage-backed securities.
4. Other administrative tactics: Think Home Buyer Tax Credit. Will the administration step in and try to create another incentive program to boost sales? Will it try to incite banks to do more short sales or loan modifications to keep more homeowners out of foreclosure? Will it create tax incentives for investors looking to rehabilitate some areas in desperate need? Of course, no one can predict these things. But we'll need to pay attention. Some analysts are already saying 2011 is likely to be another "worse" year on record for housing. With that in mind, it is highly likely that Congress will try to take some action to keep the market moving or to save more Americans from foreclosure.
These are the main issues I think we'll need to pay attention to this year. Through it all, I think it will be important to focus on our single situations and whether it's the best time for us to buy or sell – regardless of all the outside influences. It still comes down to the buyer and seller of a single transaction.