2009 is upon us and the economy, real estate market and Wall Street are looking as shaky as ever. Job losses are up, foreclosures and short sales continue to dominant the real estate marketplace and there is no shortage of uncertainty for what this year holds ahead. There is lots of news and data to share, so I have highlighted some of the more important and interesting items below- positive news is highlighted in GREEN and negative bits in RED. Let’s see which tone wins the battle.

As I look into my crystal ball for 2009, I see a continued downward price pressure on San Diego real estate but also some excellent opportunities to get into the marketplace at a significant discount and with an unbelievable interest rate.

1- 4.5% 30yr Fixed Rate Mortgage! My lenders have been booking these rates for their clients. It is also a great time to consider a refinance of your current mortgage- especially if you are in any type of adjustable rate mortgage (ARM). Remember, the new loan limit for conforming loans and refi’s in San Diego is $546,250. Refinancing activity has hit the highest level since 2003.

2- Continued Pressure Down on Interest Rates. The Federal Government feels we got into this economic mess with the bursting of the housing bubble and fixing the housing market is the only way to get us out. James Lockhart, director and chairman of the Oversight Board of the Federal Housing Finance Agency, wants to see interest rates pushed below 4%. That would take us into some uncharted territory so I am a little skeptical but the bottom line is that our government is going to do everything they can to keep rates down until inflation rears its ugly head.

3- The Next Round of Faulty Loans. 60 Minutes ran a story last month about the next wave of troubled loans that may hit the marketplace. We are all already aware of the results of the sub-prime mess but many experts feel the next round of loans set to adjust will only extend our housing slump. This clip below paints a very grim picture- most expose shows do. VIDEO LINK

4- San Diego County Population Rises. The county population rose by 46,634 people, or 1.5 percent to 3,161,477, the highest one-year boost since 2002. That is a good sign for our housing and economy…our weather, diverse job market, multiple universities, vacation appeal and retirement destination maintains San Diego’s desirability as a great place to live.

5- Defaults, defaults, defaults. As the economy continues to spiral down and job losses increase, we are seeing a new wave of defaults- “A” grade buyers- the ones who put money down, had good credit and showed paychecks when they qualified for a home loan. In addition, national data suggests that 1 in every 5 home owners in the US owes more than their home is worth. Mortgage delinquencies (owners who are behind by 60+ days on their mortgage) have risen for the 7th straight quarter.

6- Loan Modifications. The government and lenders have been streamlining programs to re-work loans for owners that want to stay in their home but can’t afford the current payback structure- aka Loan Modifications. While these can serve as a great tool for distressed owners, new data shows that 37% of these loan mods are back into defaults within 3 months. After 6 months from the time of modification, 55% of the loans are back into default. These numbers look bleak but one optimists says at least 45% of the homes where saved- that is a good point.

7- The Internal Revenue Service (IRS) is making things easier to sell a home with federal tax liens filed against it. They are willing to take a back seat by allowing primary mortgage holders to take precedence when a mortgage is refinanced or the home is sold. Now homeowners can refinance or sell a home without first having to pay a federal tax lien. The money is not forgiven by the IRS but can be paid back at a later date.

8- Calling All Normal Sellers! If you are not a short sale or a foreclosure, you probably aren’t selling your home right now. With many foreclosed homes priced well below current market value, traditional sellers are finding it very difficult to compete with banks on price and not compromise all their equity. There are a lot of neighborhoods in San Diego where my buyers only have the options of short sales and foreclosures. Renting might be a better option for some sellers that have to move.

9- Good Time to Remodel. Have you noticed a lot of construction and remodeling in your neighborhood? Down in Mission Beach, I sure have- seems like every other house has some project going on. Kermit Baker, a senior research fellow at Harvard believes this lackluster economy is creating a great opportunity for homeowners to hire better-quality contractors, negotiate better prices, and receive better service than the economy of past. Recent surveys show that 70 percent of home builders and remodelers are willing to drop their prices at least 10 percent, and 30 percent report they would be willing to offer even steeper discounts, depending on the project and the location.