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Breakout year expected in real estate

Karen Godfrey

Karen Godfrey

Real estate industry predictions for 2010 are that housing sales will increase, younger couples will be buying, fewer licensees will be selling and the market for office properties will continue to decline.

“This is going to be an amazing year” for home sales, said Karen Godfrey of Godfrey & Ivy Realty Inc. in Clinton.

Buyers will likely be younger couples and first-time home buyers. People falling into this category are in one of the few groups currently qualifying for financial assistance, Godfrey said.

The other main group of buyers in 2010 will be older buyers, possibly retirees, who have money saved, Godfrey said. Most Americans who fall in the middle don’t have enough cash for a down payment and closing costs, she said.

Godfrey predicts buyers will be focused on purchasing new homes, and the biggest part of the market will be homes around $200,000 and under. Low interest rates – between 4.75 percent and 5 percent – will help, she said.

The Worker, Homeownership and Business Assistance Act of 2009, signed by President Obama in November, extends the first-time homebuyer tax credit for consumers who purchase a residence before May 2010. Qualifying first-time home buyers can take a credit against their income taxes for 10 percent of the purchase price of a home, up to a maximum of $8,000.

Some restrictions apply. A credit is not allowed if the purchase price exceeds $800,000. Also, the credit phases out for taxpayers with incomes between $125,000 and $145,000, or between $225,000 and $245,000 for joint filers.

Additionally, purchasers can apply with the Mississippi Home Corporation for grants up to $40,000 for foreclosed properties in certain eligible communities across the state. Applicants do not have to be first-time home buyers but must earn 120 percent of the area median income or below.

Appraiser John Jenkins, president of the Jackson Association of Realtors, said metro area sales in November were down from October, which is normal as the fall is a slower selling time. However, Nov. 2009 sales were up from Nov. 2008 by 15 percent and up by 12 percent in dollar volume. He expects this type of trend to continue for 2010.

“We’ll see a steady improvement. It won’t go back to what it was two years ago,” Jenkins said, although he predicts foreclosures will continue.

Nationwide, first-time home buyers usually comprise 15 percent of the market, Jenkins said, but in 2009, they were 61 percent. He also predicts high percentages of first-time home buyer sales in 2010.

Jenkins was encouraged by a November Forbes article naming the Jackson metro area No. 3 in a list of 100 of “America’s Best Bang-For-The-Buck Cities.” Cities were rated on foreclosures (as a percentage of housing units); vacancies; unemployment rates; a three-year job growth forecast; a three-year home price forecast; housing affordability; median real estate taxes; and, median travel time to work.

Jenkins said there will probably be a 20 percent decrease in licensees at the end of next year due to the economy. The Jackson Association of Realtors dues and memberships will go down, he said.
About two-thirds of real estate licensees renew their licenses annually on Dec. 31, Jenkins said. Others renew at different times.

The licensee group includes licensees and Realtors. A real estate license is issued by the state. Becoming a Realtor requires training beyond state requirements.

Steven Rogers, president and CEO of Parkway Properties, said the commercial market always takes longer to pull out of a recession than does the residential market. He foresees the commercial real estate market to be down for one or two more years. Parkway Properties has locations in 12 states and focuses on office properties in the Jackson metro area in Mississippi.

A positive GDP growth in the third quarter means the national economy is out of the recession. However, the commercial real estate market is tied to job growth, not GDP. We lost seven million jobs in the last couple of years, Rogers said.

“We are going to come out of it,” he said. The commercial market lags behind other markets going into a recession and is also slower coming out of one.

Since the peak in 2006 and 2007, the market has already declined 40 percent and will probably fall another 10 percent in 2010, Rogers said. That means that if one built an office building for $50 million in 2007, it is now worth $30 million, he said.

Rogers said the Jackson market is saturated with office buildings, and the United States is significantly overbuilt in this area, as well. Rogers hopes new commercial office construction will come to a halt — development is not always good, he said.

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About Amy McCullough