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These days everyone wants to know where the value of real estate is headed. Many people would like to believe that declining home values are coming to an end, and that the market will take a dramatic turn for the better. Sadly, this is probably far from the truth. The decline in value may even continue over the next ten years, driven by a multitude of both complex and compounding factors. Here are four of the biggest problems facing the Real Estate market this year.

Tighter Lending Standards

Lending standards will continue to become stricter. Financial institutions are seeing their delinquency ratios rise to unseen levels; stretching across their entire portfolios from real estate to credit cards. This is forcing them to be more cautious to whom they lend and require higher credit scores to those who apply. The vast majority of financial institutions are requiring minimum credit scores in the high 600's in order to even qualify for a mortgage and the remainder of institutions are following suit. Thus, limiting the pool of potential buyers.

No More Tax Credits

The First Time Home Buyer Tax Credit program comes to a halt on April 30, 2010. This means the government will no longer be offering the incentive of up to $8000.00 for purchasing a home. Without this incentive, some would be buyers may stay seated on the sidelines. Fewer buyers means fewer offers, this ultimately translates into sellers having to lower the price of their home in order to attract the already limited number of potential buyers.

Government stops buying MBS's

Also taking place in April 2010, the government is going to stop purchasing mortgage backed securities. This means that these securities will now have to be purchased by the private sector, which is going to demand higher rates to compensate for the increased risk. This factor will force mortgage interest rates to rise. Higher interest rates result in higher mortgage payments. Unless sellers come down in price, buyers will be forced to find more affordable property.

More ARM's Due to Reset

Last but not least, there are four more waves of adjustable rate mortgages resetting their interest rates throughout 2010. They are the 3 year arms issued in 2007, the 5 year arms from 2005, the 7 year arms from 2003, and the 10 year arms from 2000. This is going to push a mass of new foreclosures into the already predominately bank-owned real estate market. Foreclosed properties typically sell for below fair market value; however, in this market nearly half of all homes for sale are foreclosed properties. It is essentially the driving factor in the declining value of real estate today.

In conclusion, it seems pretty safe to assume that the combination of tighter lending standards, disappearing tax credits, and higher mortgage rates paired with a flood of new foreclosures are going to have a profound negative effect on the already battered real estate market this year.