Whew!!! Is 2008 over yet? Has it ended? Please tell me that we are through the election and that Thanksgiving, Christmas and the New Year are behind us. Please, please, please tell me it’s true!!!

I know many of us are feeling so relieved that we are through 2008 and that some optimism has surfaced just because we are now into 2009. In fact, I have never seen holiday decorations come down so fast!!

A New Year and a chance for new initiatives and new directions; just knowing 2008 is behind us is a positive circumstance. But there are real and legitimate reasons to feel positive about this New Year beyond just antidotal situations or circumstances.

Yes, we have a long way to go both economically and in our housing market to begin to see an emergence of a recovery. And like many in this industry, I thought that by the end of 2008 we would begin to see the recovery in the housing market. That was of course before the stock market came crashing down plunging the nation and the world into financial turmoil, the likes of which remind us of the Great Depression. And while we can expect to hear more bad economic “down-turn” news expressed in terms of unemployment figures, foreclosures, and the negative collateral affect on stock prices, there are signs of several economic fundamentals that should lay the foundation for stabilization and the eventual path towards recovery.

First fundamental: Interest rates have dropped in significant fashion which is very positive. While this article won’t be released until after February 2nd, as of January 9th, according to the Orlando Sentinel and the official Freddie Mac web site, rates on a 30 year mortgage (conforming) fell for four straight weeks to 5.01%!! In fact the table below from Freddie Mac’s web site shows incredibly low rates across the board.

And jumbo loans (non-conforming) were previously above 8% and again as of this writing are now below 8% even in Florida. The web site Mortgage X – Mortgage Information Service below lists jumbo loan minimum and maximum rates again showing positive movement even in the jumbo category.

Now some may say, “Yes, but your credit scores have to be really good for these conforming or nonconforming loans!!” and I would say, “ABSOLUTELY!!” That’s the way it is supposed to work in the financing mortgage business. And while the pendulum has swung a bit to an extreme we should expect this extreme for a short while until normalcy returns to the banking industry.

A second fundamental: Actions by the Federal Reserve and Congress will impact the housing market by reducing inventories. With interest rates declining, many home owners will take advantage of the situation to refinance their mortgages. And most recently congress announced “breakthrough” negotiations with the banking industry to allow “bankruptcy judges to alter home loans in an effort to prevent foreclosures,” as detailed by Alan Zibel in his article on January 9th in the Orlando Sentinel. Both actions will enable home owners who have their homes on the market to take them off the market thereby reducing total inventory. This is very positive in that, when reduced, declining inventory will act to re-balance the supply and demand formula that has been out of whack for several years. As seen in the table below, in our now traditional presentation of the Orlando area housing statistics, more reduction in inventory (back to below 16,000 vs. the current 22,524 is still needed and will be a good statistical event further improving the supply and demand dynamic.

A third fundamental: Reduced inventories will begin to stabilize house prices. The real estate industry is still suffering from too many homes priced too high for market conditions. Many times buyers who are credit worthy and have pulled the trigger and written contract offers can’t obtain contract approval on the home because the offering price isn’t approved by the lender. Appraisers when performing an appraisal must declare many neighborhoods as “DECLINING” on their appraisal form that is turned into the bank contemplating the mortgage. When this is often the case, the loan is not approved regardless of the buyer’s credit and amount of down payment because the contract price is too high for the market and the bank is not going to make a loan on a over priced home. When prices begin to stabilize due to the decreased inventories, appraisers will no longer have to declare communities and neighborhood as “DECLINING” and more home loans will be approved and the market will begin to stabilize and have the fundamentals for eventual home value appreciations.

Of course the $64,000 dollar question is when could these three fundamentals begin to be realized? Is it the 1st or 2nd quarter of this year? Will it take the entire year to realize some improvement? Or, as some “experts” have said, is it going to be well into 2010 before we see improvement? My opinion is that 2009 is the year of stabilization and 2010 will be the year we see some recovery. Some have said that demand has been down for so long that when it does start to turn around it will be with a big bang. I hope not, since we need a steady reasonable recovery not wild fluctuations that could lead to another bubble. But who knows!! What I do know is that I am glad 2008 is over and glad to be into 2009.

We have several congressional and treasury actions that are in the works not to mention the upcoming presidential inauguration. The major initiatives being contemplated by our government will hopefully have the desired stimulus on our economic progress and offer hope for both our economic and housing recovery. There are those who believe that while housing lead us into this mess it will also lead us out. I think that there is a bit of truth to that notion but that we also have other issues which we must focus on outside of just housing for our long term economic viability. But with everything said and everything considered I am just extremely happy to be into 2009 and sense we will see some positive events moving us in a better direction.

In the end I have never been happier to be able to say “Out with the old and in with the NEW!!!!”