A crystal ball with cash inside - real estate predictionsThe days when anyone could claim to have a reliable crystal ball for the real estate market have long passed. Nevertheless, what's past is prologue: There's a lot going on in the market right now that is likely to have a pretty predictable impact on real estate in 2011. Let's look at how homebuyers can expect to fare next year with these four real estate predictions:

1. Prices and mortgage rates will stay low in most areas, but will rise in affluent areas and markets experiencing job/population growth. If you've been watching the housing market bottom out over the past few years, cursing the fact that as soon as prices dropped, down payment requirements ticked upward, stop cursing and start saving. Any fears that you'll quickly be priced out of the market are relatively unfounded, in most areas. High numbers of homes for sale, the continued influx of distressed properties like short sales and foreclosures into the housing market, the overall economy's stagnation and high unemployment, and the probable lack of new government incentives for home buying will all combine to keep the supply/demand imbalance tilted pretty heavily in favor of buyers. That, in turn, will keep prices relatively low, especially compared to their 2006 peak. And when buyer activity is low, the Fed keeps interest rates low, too.

The exceptions? Affluent areas where wealthy households will continue to take advantage of relatively low home prices to buy homes; for example, San Francisco has had a double digit increase in home prices over the last 12 months. High unemployment rates in some of these high-end markets are misleading, as there may be job growth in the sector of high-income jobs requiring skills not possessed by many in the unemployment lines. Also, home prices will stay supported and possibly even creep up in cities that have had job and population growth over the past decade -- including Texas cities like Austin, Houston and San Antonio; Midwestern towns like Oklahoma City and Des Moines; and Salt Lake City, which Newsweek's Joel Kotkin deemed a "New Silicon Valley."

Prediction: Buyers will have plenty of time to take advantage of low prices, which will stay low next year, except in markets with positive job and population growth.

2. Loan guidelines will tighten up, and down payments and loan costs may rise.

We've all seen lenders tighten up mortgage guidelines over the last few years, requiring bigger down payments and forcing buyers to document their income and assets. With its low 3.5% down payment requirement, loans insured by the Federal Housing Administration (FHA) have skyrocketed in popularity in this post-subprime era, going from about 3% of loans originated pre-bubble to about 30% of loans originated in 2010. Buyers' favoritism of FHA loans will only continue to increase in 2011; a recent study by the Home Buying Institute revealed that 87% of home buyers said they plan to use an FHA loan to finance their purchase, with easier qualifying guidelines being cited as the primary reason for preferring FHA loans to conventional.

The tight debt-to-income ratios and other standards do seem to be working; the National Association of Realtors recently noted that "mortgages that were recently originated show an outstanding performance, even better than during the pre-housing bubble years." As FHA loans look poised to dominate the lending market, the FHA faces two pressing needs: (a) cash, and (b) to ensure that default rates stay very, very low. In fact, this year, Congress considered (but refrained from passing) a bill proposing to boost FHA's bankroll by hiking the down payment requirement up to 5%. The same proposal called for eliminating buyers' ability to have sellers pay their closing costs as part of the deal; in fact, FHA did actually drop the permissible seller-paid closing costs guideline from 6% to 3% in 2010. FHA also raised the costs of mortgage insurance this year.

Prediction: You can expect this trend in tweaking FHA lending guidelines to require buyers to put more of their own skin in the game to continue in 2011.

3. Condos will become even more difficult to buy.

Most lenders require that no more than 15% of home-owner's association (HOA) members be 30 days or more behind on their dues, and conventional (non-FHA) loans require at least 25% of the units be owner-occupied. While FHA guidelines allow loans on units in HOAs with up to 49% tenants, the condo complex must be FHA-approved to use an FHA loan to buy a unit.

The days when a quick FHA "spot" approval could be done on a unit-by-unit basis are long gone. Now, the whole complex must be approved before a unit can be bought or refinanced with an FHA loan. HOAs can apply for HUD approval, but it takes 2-3 months to obtain. The expedited, 10-day approval some lenders are authorized to bestow is increasingly hard to get, as lenders don't want to bear the burden of guaranteeing all loans made -- by them or another lender -- based on that approval. Foreclosed condo units tend to both be delinquent on their dues and non-owner occupied, making the problem even worse.

The HOA-related challenges around obtaining either FHA or conventional loan approval has stopped many units from being sold across the country, and that has already started to spiral into declining condo values and even more dues delinquencies and walkaways in condo complexes. And FHA condo HOA approval criteria are set to already get even tighter in 2011!

Complexes with high delinquency rates or lots of non-owner occupied foreclosure units won't even qualify for non-FHA loan.

Prediction: As more condo owners find they can't sell their units and unit values fall, more will fall behind on their dues, walk away or rent their tough-to-sell homes out -- all of which will undoubtedly make it harder to finance and buy a condo in 2011.

4. Conservative buying will be the name of the game.

Not using every cent you possess for your down payment. Buying a home with a mortgage payment you can comfortably afford, even if you were approved for more. Negotiating already-good list prices downward and asking the seller to help you buy your interest rate down.

Next year, we'll start to see the aggressive general consumer bargain-seeking that some call "the New Frugality" take expression in buyers who first started saving up for home ownership at the start of the housing crisis, and have scrimped and conserved to buy at post-bubble pricing. We also may see the first wave of post-foreclosure buyers -- former homeowners who lost their homes during the sub-prime implosion around 2007-2008, and are fresh out of the 3-year post-foreclosure waiting period to qualify for an FHA loan.

We'll also see a significant number of buyers who have been sitting on the fence, waiting for the bottom and may have missed it, but believe they can make up for any missed timing opportunity with the right deal. All three of these groups, as well as any other buyers who decide to pull the trigger on buying a home next year, will be looking for low prices, and the sense that they're getting an amazing value for the price.

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