There are likely to be several good reasons that real estate will look better to both sellers and buyers in the next year / time of course will tell.

Mortgage rates will remain at historic lows. No doubt interest rates will increase but will still remain at historic lows probably in the 6% range which is well below the historic home mortgage rate of the last forty years which has averaged out closer to 10%. Despite indecision and jawboning in Washington as to what to do about both Fannie Mae and Freddie Mac realistically there will be no economic recovery without housing and there will not be without a secondary market with out Fannie Mae and Freddie Mac. Probability is that nothing concrete will be changed in the coming year which is actually good since the proposals originating from the talking heads in Washington are almost all bad, all anti-housing and all likely to lead to a worse rather than a better housing picture therefore nothing is likely to be done.

At the end of the day we are still Americans and as a group we still want to own homes. Probably the approach to home ownership in some regions of the country will be more basic than it has been in many years, (people will go back to buying housing for well housing rather than speculation), but this is probably a good thing in the long run which would lead to greater stability in the lending sector and more confidence in the consumer sector which will bring more of the average home buyers off the sidelines if they don’t fell like they will loose their house once they buy it. (Fannie Mae has recently done a survey that shows the majority of Americans still believe a home is a safe and usable investment.)

Builders and lenders will begin putting new inventory into the system. Builders have not been able to build profitable for several years and many have been saddled with inventory that appears to be going away. Lenders have put most of their “trash” inventory on the market in the last two years in hope that they could force it through the system as buyers would have little or no choice which in many cases was true. It appears that lenders are making plans to release a significant volume of properties after the New Year that is likely to be of a more competitive quality and well priced.

There is talk of tax cuts. For now the current tax code is in place that allows the interest and taxes on both a principal residence and secondary residence to be deducted from most peoples taxes. The Pushme-pullyou activity makes this too close to call but it would appear that the minds set of the new congress forming in a few days is more likely to manipulate the economy through the tax code than the failed one time direct action that we’ve seen in the last two years. Watch and see but something will probably happen here by late spring for the better.