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Home prices began to stabilize during 2010, and homes sales showed some signs of encouragement. We expect more of the same in 2011, although there will be some additional headwinds.

After a modestly good start to the year, home prices could actually decline slightly in some areas, particularly depending on the health of the local job market. In the end, however, home prices should eventually and slowly begin to firm up toward the end of the year.

Another headwind that could weigh on home prices is the overhang of several million distressed properties. The moratorium on foreclosures has ended and all of the major lenders have resumed foreclosure procedures. At the end of last year, 3 Million homes were in foreclosure activity, with over 1 Million repossessions. Foreclosure expert Rick Sharga of RealtyTrac said the industry will exceed both of those numbers this year. "Banks are statistically getting better at modifications and short sales, but neither are increasing fast enough to offset foreclosures," said Sharga.

Overall, we expect to see accelerated rates of foreclosures in the 1st Quarter until things settle to normal during the 2nd Quarter and rest of the year. This could extend the housing downturn a couple of months longer.

That said, there are also many potential homebuyers who have been waiting on the sidelines to step in and purchase a home at still affordable rates and home prices. Waiting much longer could prove to be costly for those homebuyers, who will likely see both home prices and home loan rates move higher in the year ahead…and make sure you are messaging that out to your prospects, clients, and referral partners.