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There’s a lot of uncertainty surrounding the housing market. Is it going up? Down? A lot of people are making predictions, but they tend to look nationwide or citywide. But what about your specific farm area? Here is the best way to determine what YOUR housing market is going to do in 2010.

There are a number of factors that drive real estate prices up or down in any given area. Each market reacts to its own set of conditions, and even different neighborhoods and types of properties will react according to its own set of circumstances.

To narrow the trend data down to your area, look at trends within a 1 mile radius of the center of your area and look at homes that are within 10% of the square footage of the median size home and lot that you are looking for.

Home prices are for the most part determined by the months of housing inventory available. Price changes tend to lag behind changes in inventory by about 6-10 months. So if housing inventory increases, you will see a decrease in prices about 6-10 months later. If the inventory decreases, prices will then rise about 6-10 months later. Real estate investors are able to use short sales to offer deeply discounted prices when they sell houses before the rest of the homes in an area catch up.

There is a very simple rule of thumb you can use in your market in 2010. When there are 8 months or more of inventory available, prices will fall. If there are 2-3 months of inventory available, prices will rise.

If your area has a high demand for starter homes that was not quenched by the first round of the First Time Homebuyer credit, there may be a continuation of the feeding frenzy experienced in some markets. With the extension to all buyers, a larger supply of starter homes may be available in some markets, spurring sales and boosting prices. There are indications that the tax credit is just a minor factor in the economic recovery picture, though. Only 6 percent of homeowners who bought homes for the first time this past fall did so because of the tax credit.

Gen Y’ers (1977-1994) are in their prime home-buying years. It will take a relatively small increase in demand to spark building in those parts of the country that generate jobs for this age group and have remained relatively stable during the recession.

Another factor that drives prices is cost of ownership. The U.S. Treasury will play a part in determining whether 2010 is naughty or nice to homeowners. The Federal Reserve showed little incentive to raise interest rates in 2009, but things may change in 2010. There may be pressure on the Fed to increase interest rates to attract more buyers of U.S. debt. Even a small increase in interest rates will drive potential home buyers out of the market.

Higher property taxes or income taxes at the state and local level could drive potential buyers out of the market. Local and state governments might succumb to pressure to raise these rates in order to balance their budgets for 2011.

Last is the impact foreclosures will have in your specific market. There will probably be spikes in foreclosures occurring in markets that relied heavily on Option ARM mortgages to sell homes from 2004-2007. These rates will reset soon as interest rates increase, causing foreclosures to spike. Those communities that are already drowning in unemployment will also face another rash of foreclosures.

These are some of the factors that will have an impact on home prices in your local market in 2010. Make sure to apply the ones that fit, because each market and micro-market will act differently this year.

Learn more about real estate investing. Stop by Bob Massey’s site to get your FREE copy of his ebook on how to find motivated sellers.