With 2008 almost behind us, and thankfully so for the housing market, what can we look forward to in 2009? Several housing issues confront President-elect Obama as he takes office next month. First is what to do to stem the tide of foreclosures. Until the available housing inventory can be brought under control there will not be a housing recovery. Next, what to do to make housing more affordable for more people. Rates are low, but the leverage cycle is the sticking point. As long as it takes more than a 5% downpayment, fewer people will be able to purchase a new home.

According to Nicholas Retsinas, director of Harvard’s Joint Center for Housing Studies, there are too many solutions floating around. Agreement must be made about a mortgage loan modification plan to prevent further foreclosures. As long as housing inventory remains high or increases, the psychology of buyers will be that they should wait for home prices to fall further.

The President needs to also focus on making housing more affordable for more people. First time buyers and many 2nd and 3rd time buyers are simply unable to afford downpayments of 20-25%. That means the solution requires reducing the collateral needed to buy a home either in the form of home buying credits or lowering mortgage loan down payment requirements.

Both of these problems are clearly solvable, but action needs to be taken quickly in order to save the 2009. Coupled with rising unemployment, these are the key issues in terms of economic recovery for the U.S. housing market.