As 2010 fades into dust – a year which many think is best forgotten – the dawn of 2011 beckons on the horizon.  The question before us is, what’s 2011 going to look like compared to 2010, 2009, and even 2008?


If the headlines which greet us in the dying days of 2010 are any guide to go by, we can expect more of the same as we’ve had in years past.  In fact, it seems like it’s pretty much back to the future, as many pundits are saying that the dreaded Double Dip in real estate prices is now upon us.

From CNN:  Nation on the Edge of double-dip in Home Prices

Home prices took a shockingly steep plunge on a monthly basis, an indication that the housing market could be on the verge of — if it’s not already in — a double-dip slump.

From Bloomberg:  U.S. Property Values Decline More than Forecast in S&P/Case Schiller

Home prices dropped more than forecast in October, a sign housing will remain a weak link as the U.S. recovery accelerates into the new year.

From CNBC:  Housing Double-Dip Ahead: Economist (video)

David Rosenberg, chief economist at Gluskin Sheff, tells CNBC another decline in housing prices is being underestimated.

To me, this is hardly sensational news.  I, for one, have been waiting for some time for the other shoe to drop.  I’ve been telling anyone who asks for a long time that I believe that we are in a gradual, prolonged decline in home values that will probably continue for some years.

Granted, it has been a little difficult to hold that tune when there has been so much optimistic chaff from housing bulls about how prices have stabilized and in fact are rising in some markets – a contention that is now put to lie by the latest Case/Schiller numbers.  Certainly, there are some areas and of course specific neighborhoods where prices have stabilized and may in fact have risen somewhat.

In general, though, it’s pretty clear that we are nowhere near out of the woods yet with the housing crisis.  And in fact, the coming of the double dip clearly indicates there is more “correction” to come.  For those in the REO Brokerage business such as myself, it means that we can anticipate that 2011 will probably be comparable to the recent years gone by.

The reason for that, of course, is that there’s no shortage of research which indicates that a key driver of foreclosure is lack of equity in a given property – that is to say, the more underwater a borrower becomes on their mortgage, the ever-increasing likelihood that they will simply chose to walk away from their mortgage obligation and let the property go to foreclosure.  This is known as strategic default, and it’s something keeping up many a banker late at night.

It all points to a continuing stream of steady foreclosures pouring into the REO bucket, continued pressure on housing prices, and good and perhaps increasing affordability for buyers.  Of course, many buyers are still on the fence because they fear they may lose their jobs, or the market may have more to fall – and both are good reasons to stay right there on that fence if you ask me.

For those buyers who do feel secure in their incomes and plan to buy a house to – gasp – live in for some time to come, raise their kids – you know, the things people used to do with houses – it’s probably a fine time to buy.  To these buyers, it matters little to them if the price drops another 5-10% over the short term, so long as the payments are affordable and they have long time horizons.