Real Estate in 2010: Uphill Battle Continues

By Kevin Grewal, Editorial Director at www.SmartStops.net

NEW YORK (TheStreet) -- As the economy starts to show signs of a self-sustaining recovery, many have suggested that the real estate markets have bottomed out. However, there are plenty of signs to indicate an uphill battle still lies ahead.

From an optimistic view, real estate is still relatively affordable, consumer spending is trending in the right direction, real disposable income is on the rise, consumer confidence is at a three-month high, new-home construction is low and home sales are improving. These are all positive factors for the real estate markets that influence supply-and-demand forces and generally push prices up.

However, it is more likely that foreclosures and the demise of government funding will put a damper on these positive factors, further hindering the real estate markets.

According to the National Realty Association, there are more than 2 million homes currently in the foreclosure process and some real estate experts suggest that an additional million or two will likely follow in the coming months. With this in mind, banks are likely to flood the market with these homes, pushing inventory levels up and producing more than ample supply.

As for the government, the Fed is likely to increase the federal funds rate and exit the mortgage-backed securities program in the first half of 2010, which is expected to result in a significant increase in mortgage rates. Many suggest that the Fed's purchase of mortgage-backed securities is one of the major driving forces propping up the real estate market.