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It's hard to articulate what it is about the market in the last 18 months that has made it such a bonanza for smart investors. The list of elements is too long! Let's take a look at where the individual market conditions that turned 2008 into a perfect storm for real estate investors are likely to go in 2009, the opportunities likely to arise for foreclosure buyers and investors as a result.

The Cost: Home Values/Prices

• Prediction: Home prices will stay low and, in many areas, continue to drop for at least the first two quarters of 2009. However, we should see home values stabilize in most markets by the end of 2009.

• Evidence: Many markets have increasing unemployment and more than 15 months worth of housing inventory on the market still needing to be absorbed.

• Possible Alternative Ending: Markets like many metro areas in California, where the number of purchase transactions has been skyrocketing as prices decline in the last half of 2008, may see inventory absorb more quickly than expected, driving prices up more quickly. Also, if lenders and government agencies get serious about implementing foreclosure avoidance solutions, values could have an upswing even sooner.

Supply: Inventory of Homes

• Prediction: The inventory of homes on the market will decrease throughout the year.

• Evidence: Lenders are already moving proactively to avoid foreclosures by modifying mortgages. This keeps some would-be sellers in their homes and diminishes the number of bank-owned properties that end up on the market.

• Possible Alternative Ending: If mortgage lenders do not continue to offer increasingly real solutions for home retention and loan modification, the 2 million-plus mortgages still slated to reset could move into the foreclosure process and end up on the market as short sales and/or bank-owned properties.

Demand: Buyer Activity

• Prediction: Buyer activity and the number of sale transactions closed should steadily increase throughout the year.

• Evidence: As the bottom looms nearer and nearer, those who have been waiting to buy are already starting to crawl out of the woodwork; a number of states have seen transactions increase over the last 6 months.

• Possible Alternative Ending: Any major economic disaster could turn this prediction on its head.

The Number of Foreclosures

• Prediction: The number of homes which go all the way through foreclosure and end up on the market as REOs will go down. The number of short sales and the feasibility of being able to successfully buy short sale listings, however, will go up.

• Evidence: Fannie and Freddie have already declared a 60-day foreclosure moratorium on homes with loans they insure. The Obama administration plans another 90-day or longer foreclosure moratorium on all homes after Inauguration Day. Lenders are already using these freezes to modify loans and help distressed owners retain their homes or offload them through short sales.

• Possible Alternative Ending: If any major industry (think auto) totally implodes, the number of unemployed homeowners who can't even make a reduced mortgage payment or sell their auto-belt homes short will explode and prevent the number of REOs from dropping.

Interest Rates

• Prediction: Rates will stay low, very low, throughout the year to encourage lending.

• Evidence: Rates are already low, and the Fed is likely to drop them to record lows at the December rate-setting meeting.

• Possible Alternate Ending: The chances that rates will stay anything but very low throughout 2009 are between slim and none.

Availability of Money

• Prediction: Money will become more available to buyers and investors in 2009, but not on the super-easy, bare bones qualification guidelines of the subprime era.

• Evidence: Fannie and Freddie, FHA and HUD are all making moves to maximize the liquid mortgage money available for lending to homebuyers. The federal government appears likely to tie further bailout money to institutions' commitments to lend.

• Possible Alternate Ending: Further bank failures and/or buyouts may cause temporary glitches in lending, but they are likely to be temporary.

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