The current state of affairs are falling home prices and foreclosures.
According to the S&P/Case-Shiller Home Price Index, home prices fell 28 percent by the end of 2009 from their July 2006 peak. In 2010, national housing prices are predicted to fall another 10 percent. There is some hope that prices will stabilize in early 2011 assuming job losses come to an end and unemployment begins to decline.
One of the biggest obstacles, besides unemployment, to stabilizing home prices in this economy is the threat of a new wave of foreclosures due to the growing number of homes with mortgages that are “underwater”. In 2008, more than 1.7 million homes were foreclosed on. Another 2 million were lost in 2009, and Moody’s Economy.com projects that 2.4 million will be lost in 2010. According to Deutsche Bank Securities projections, 21 million households will have mortgages underwater by the end of 2010, over 40 percent of mortgaged homes. New administration programs to foster mortgage-modifications have been put in place but the principal balances of millions of mortgages would need to be substantially reduced at a cost of billions of dollars. This is unlikely to happen and the vast majority of those people who are unemployed and underwater will mostly likely be foreclosed.
Thus, Community Leaders now have to deal with issues such as delinquencies, bank owned properties and renters more than ever before.
As for the future, changes in demographics and their demands will drive the housing market in new directions.
At a recent meeting of the Urban Land Institute of Minnesota, Senior Fellow John McIlwain declared that “the suburban century is over.” He predicted that a combination of economic, demographic and regulatory trends over the next decade will create “a new normal” in housing markets across the United States and that cities and suburban town centers that provide a “vibrant 24/7 lifestyle” will have the strongest demand.
The second-home market also will be weak in the coming decade. The baby boomers are at the prime stage for buying a second home, but most will be unable to afford one because of diminished earnings, tight credit, and the lack of equity in their first home on which to draw for a down payment. Only those second-home markets that appeal to the wealthiest will remain strong, although there may be opportunities for lower-cost but well-designed smaller second homes.
Interest in energy-efficient, healthy, and environmentally friendly homes, volatile energy prices and the evolution of local, state, and federal building codes all new homes will produce most if not all of the energy they use, and the “net-zero-energy” home will become the standard.
Although the future is never set in stone, Community Leaders need to have a strategic plan in place to adapt their communities sufficiently to meet these new housing demands.
All these challenges both present and future, Community Association Leaders can come to the Fall Conference Friday October 1, Marriot City Center in downtown Charlotte to learn and network information to help guide their decisions.