SpringfieldNewsSun.com

Homeowners in 2007 saw property values deflate faster than a New Year's Eve party balloon. But local experts say conditions are right in 2008 to put some air back into the housing market.

The market will remain favorable for buyers as it is saturated with unsold homes and foreclosed properties, said Global Insight economist Patrick Newport.

Sheriff's sales of home foreclosures in Butler County surged from 1,312 in 2006 to 1,672 properties last year, said sheriff's spokesman Sgt. Monte Mayer.

Hamilton has 466 active home listings, said Jim Abele of the Greater Cincinnati Multiple Listing Service.

And there are 564 active home listings for Middletown, said Reva Owens, president of the Middletown Board of Realtors.

Interest rates are hovering at 6 to 6.5 percent. That's compared to the 7 percent interest rates available before the real estate bubble burst, said Coyt Rains, outgoing president of the Hamilton-Fairfield-Oxford Board of Realtors.

So what's keeping buyers from entering the market?

"With all the bad news about the market today, people are afraid. Positive news about the housing industry would help," Rains said.

An increase in home purchases could do a lot to help turn the market around.

"It's looking better. It'll come back gradually," said Rains. "You can't ever just draw the line and say 'this is when it's going to change.'"

Last year in Hamilton and Middletown, 1,435 homes were sold. That's a 1 percent decline from 2006.

But that's much better than Cincinnati, which had a 11.2 percent decline in 2007 home sales, according to the Cincinnati Area Board of Realtors.

It's already a buyer's market, but it could get even better for those looking to own a home.

Home prices could fall another 10 percent from where they are now over the next year before flat-lining, said Patrick Newport, an economist with financial consultants Global Insight.

There are many incentives for those looking to own a home, including low interest rates and a plentiful home inventory, said Reva Owens, president of the Middletown Board of Realtors.

"You are going to get more house for your money today," she said.

The selection can partly be attributed to Butler County's high rate of foreclosures, which have hit Hamilton and Middletown hard.

But another bonus for home buyers is that four of the largest groups trying to unload homes — banks, home builders, speculators and unemployed consumers — are typically flexible about lowering house prices because they need to get rid of the property, Newport said.

Last year in Middletown, 693 residential properties were sold, which was less than a 1 percent decline from sales in 2006. In Hamilton, 742 homes were sold, which was a little more than a 1 percent decline from 2006 sales.

"My outlook is that we are going to have a very good year, by the second quarter of the year we are going to go back out. January is already starting to look very good," Owens said.

In October 1979, the housing market took a drastic hit. Although the foreclosure rates were not as high then, the amount of unsold homes saturating the market was much higher, said Coyt Rains, outgoing president for the Hamilton-Fairfield-Oxford Board of Realtors.

"In October of 1979 it was like someone flipped a switch. The savings and loan industry in Ohio collapsed, causing a nationwide effect. Home prices were more depressed then than they are now. Interest rates went up 20 percent," Rains said.

But what could happen if things don't start turning around?

"The housing market is one of the biggest engines that drives the economy. It affects everything. If this continues, the country would be in a deep recession," said Rains.

"I don't think the government can allow that to happen. It would have to pump some money into the economy to jump-start things," he said.

The housing market may already be as far south as it can go, said Rains.

"We are pretty close to the bottom if we haven't already bottomed out. It could be 2009 or later before we say things are good again, but it's gradually improving," Rains said.