Real Estate Outlook: What's in Store for 2010?

What will the new year bring for housing and real estate? It's easy to look at all the negative economic news in the headlines and say - there's no sign that 2010 is going to be any better than 2009.

But here's a different perspective to consider from one of the country's veteran financial analysts -- Richard Bove of Ladenburg Thalmann, an investment banking company.

In a research report issued late in December, Bove said he sees a positive dynamic taking shape in the current cycle. The government has intervened aggressively in the markets to push interest rates down -- most notably in the home mortgage sector.

Though it takes awhile for low-cost money to begin having its effect, Bove said he expects "housing prices to stabilize and/or rise (in 2010) after a likely boom in mortgage refinancings as rates fall and loan applications increase."

Add in the expected massive economic stimulus package put together on Capitol Hill with the Obama administration -- and there's a good chance we're going to see a gradual transformation of the downward cycle into a slow rebound over the coming several quarters.

Already there are positive signs of the turnaround Bove predicts:

• Mortgage applications are off the charts, mainly for refis but also to buy houses at affordable prices.
• Rates continue to hover at 50-year lows - five percent and even four and three quarters percent for 30-year mortgages, and still lower for 15 and 20 year mortgage terms.
• Plus we're all paying a lot less at the gas pump, and sharply discounted prices for retail goods and autos.
• And guess what? Americans are actually SAVING again, the national savings rate took a nearly three percent jump last month. That might sound small, but it's hugely important if it is the start of a trend.

There are also some signs that housing prices are stabilizing in some parts of the country. The latest monthly Federal Housing Finance Agency index found home prices UP by six-tenths of a percent in the Mountain states and UP by two tenths of a percent in New England.

You can ridicule small regional gains as statistically irrelevant, but here's an economic proposal to you for the New Year: Keep your eyes open for the small positive signs that are accumulating out there … because all down cycles tail off and come to an end.

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