This year, 2010, certainly has been a bumpy ride for the housing market.  We saw another wave of foreclosures hit this summer, the tax credit ended in June, and USDA's popular Rural Development Loan ran out of funding.  There continued to be a tightening of credit and credit requirements, and home values, at least locally, continued to fall.

As we look froward to 2011 there are current policies in place that will dictate the direction the housing market will turn.  Will it remain the same?  Will it get worse? Will things improve? With policies changing on almost a daily basis, it will be hard to tell, but here are a few details we do know:

The President recently signed into law a measure that allows HUD to increase the amount of Mortgage Insurance Premium (MIP and also known as Private Mortgage Insurance PMI) to as much as 1.5%.  What does this mean to the current homeowner?  Right now it means little.  What it means for homebuyers after October 4, 2010 is a higher mortgage payment.  I consulted with Jeff Halbert, Senior Loan officer for First Home Mortgage.  According to Jeff, the impact for a home buyer purchasing a $300,000 home after October 4th could be an additional $200 a month.  In addition, home buyers would now qualify for less once the additional MIP is figured into the equation.  Potentially, this "cost" could be passed along to the sellers in the form of lower sale prices....to the tune of 5% lower as a result.  The projected impact of this policy change will hit in the Spring of 2011.

Another factor is the current Credit & Swisse statistic on upcoming ARM adjustments.  Do you remember back in the summer of 2006 when Adjustable Rate Mortgages were being handed out like candy at Halloween?  Those will finally be maturing this year.  We are expected to see a peak in home defaults as a result.  The month of July is expected to see the final and largest wave in what has been a series of waves that have rocked the housing industry.  This wave will also be comprised of Americans who have had good to excellent credit, and coupled with a bad economy, are unable to hold onto their homes.

But there may be some help coming.  While details are just now emerging, there is a program being rolled out this month that may help struggling home owners. What I know of this plan is that banks will be able to lower struggling homeowners mortgages to the current value and write off the remaining loss to the Federal Government.  Details should be out later this month. As a real estate agent, being on the "front line", I am anxious to see an end to this crisis, and hope the timing of this program is more than just politics.

What we do know is that none of the past programs aided ALL homebuyers, nor did they address the majority of hardship scenarios.  Many homes that were lost were military and government employees who were reassigned to work in a different area.  These were people that had exceptional credit.  What about the average Americans that lost their jobs or took a pay cut? How do banks adjust mortgages to homeowners who now have little or no income.  There are still a great many questions to be answered.