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I think.... Due to limited inventory, coupled with pseudo pricing on short sales and foreclosures, more buyers will find themselves competing over the attractive listings. It will not be unusual for sellers to receive 20 or more offers on these listings.

Multiple offers may drive up the prices to market value but buyers will refuse to pay over market value. The stiff competition will cause frustration and confusion among buyers who will find themselves going head-to-head with investors. Cash buyers will win every time over buyers who need financing.

This means it will be more important than ever for home buyers to hire an excellent negotiator.

One can count only so many sheets of copy machine paper before it makes no further sense to try to cut costs. Although real-estate related companies such as banks, escrow and title have already reduced staff and cut expenses, many will find themselves unable to continue operating without folding their doors or merging with a larger corporation. Real estate brokerages are not exempt and will struggle as well.

As a result, competition will shrink toward monopoly and a few corporations will control various aspects of the real estate industry. This will limit consumer choices as the little guys continue to get stomped on. The public will turn the other way as the government steps in to control the banking industry, because consumers will be pushed to the brink of desperation and apathy.

Since more real estate agents will be leaving the business, the industry will weed itself of lackluster and inexperienced real estate agents.

ONE MORE.... Banks Will Pursue Foreclosure Options Over Loan Modifications

Banks will find it is easier and less expensive to foreclose than to attempt loan modifications. It is probable that banks will decide it is more profitable for them to foreclose than to rewrite a loan. In that event, banks will prefer to make loans to new borrowers who meet rigid standards.

As a result, the number of foreclosures will continue to rise. Many 5/1 ARMs will begin to adjust during 2009 and 2010, causing more foreclosures. But consumers won't see many of those foreclosed homes show up in MLS, which will artificially reduce inventory.

Some banks will change their guidelines to allow foreclosed upon sellers to buy another home after six months.

Anoteher - Real Estate Predictions for 2009

Tax Breaks for Home Selling Will be Revised

Baby boomers who hope to downsize in 2009 may get hit with an unexpected change in the I.R.S. Tax Code Section 121, if Congress revisits this tax break. The law has been exempting $500,000 for married couples and $250,000 for single people from capital gains only since 1997.

I predict that the government will try to change the home sale tax exclusion in 2009, disallowing the free money that up to now sellers have been able to pull out of their homes upon resale. Congress needs cash to refill the treasury depleted by bailouts and continuing military action.

Sellers should consult a CPA to determine the best way to avoid taxes upon resale.