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There’s a lot of uncertainty surrounding the housing market. Is it going up? Down? A lot of people are making predictions, but they tend to look nationwide or citywide. But what about your specific farm area? Here is the best way to determine what YOUR housing market is going to do in 2010.

Prices rise or fall in a specific market based on a number of different factors, and every market will move based on its own unique conditions. Within that market, even different property types and neighborhoods will react differently.

To narrow the trend data down to your area, look at trends within a 1 mile radius of the center of your area and look at homes that are within 10% of the square footage of the median size home and lot that you are looking for.

Home prices are for the most part determined by the months of housing inventory available. Price changes tend to lag behind changes in inventory by about 6-10 months. So if housing inventory increases, you will see a decrease in prices about 6-10 months later. If the inventory decreases, prices will then rise about 6-10 months later. Real estate investors are able to use short sales to offer deeply discounted prices when they sell houses before the rest of the homes in an area catch up.

There is a very simple rule of thumb you can use in your market in 2010. When there are 8 months or more of inventory available, prices will fall. If there are 2-3 months of inventory available, prices will rise.

In many areas the first round of the First Time Homebuyer credit could not quench the high demand for starter homes. If your are is one of them, the feeding frenzy for lower end homes could continue. Since the credit was expanded to all buyers, sales and prices may be boosted because there will be a larger supply of both homes and buyers available. The impact of the credit might not be that large, though. Only 6% of people who bought homes this last fall said that they did it because of the tax credit.

People born between 1977 and 1994, also known as Gen Y’ers, are entering their prime home-purchasing years. Areas that are able to generate jobs for people in this age group or have remained stable during the recession will probably only take a small increase in demand to spark building.

Cost of home ownership is a factor that helps determine the price of homes. In 2010, The U.S. Treasury will be instrumental in helping determine whether the market will go up or down. They showed little incentive to raise interest rates in 2009, but things could be very different in 2010. The Fed will probably face pressure to increase interest rates in order to get more people to purchase U.S. debt. It would only take a small increase in interest rates in order to squeeze some potential buyers out of the housing market.

State income taxes and local property taxes could increase in the coming year as the local governments face pressure to balance their budgets in 2011. Any increase in property taxes will decrease the number of buyers in the market.

Lastly, foreclosure rates could play a very important role in your area. There will be spikes in foreclosure rates all around the country. Especially in those areas that relied heavily on Option ARM mortgages to sell homes between 2004 and 2007. Their payments will adjust up as interest rates necessarily increase. Communities already experiencing high unemployment will also be facing an increase in foreclosures.

These are just a few of the factors that will impact your local market conditions in 2010. Apply the ones that fit. Every market and micro-market will be different.

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