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NAR: Stable
existing-home sales expected in early 2008, then gradual rise
Posted January 9,
2008
WASHINGTON – Jan. 9, 2008 – Over the next few
months, existing-home sales are expected to hold fairly steady as
indicated by pending sales activity, then rise later in the year and
continue to improve in 2009, according to the latest forecast by the
National Association of Realtors® (NAR).
Lawrence Yun, NAR chief economist, says there is a pull and tug exerting
itself on the market. “On the one hand, we have a pent-up demand from
the four million jobs added to our economy over the past two years of
sales decline,” he says. “On the other, consumers continue to wait for
additional signs of market stabilization. There are more people with
financial capacity now than in 2005, but many are trying to market-time
their purchase. As a result, the exact timing and the strength of a home
sales recovery is a bit uncertain. A meaningful recovery in
existing-home sales could occur as early as this spring, or it may be
further delayed toward late 2008.”
The Pending Home Sales Index, a forward-looking indicator based on
contracts signed in November, fell 2.6 percent to a reading of 87.6 from
a strong upward revision of 89.9 in October, but remains above the
August and September readings and indicates a broad stabilization. The
index was 19.2 percent below the November 2006 level of 108.4. “Although
there could be some minor slippage in the first quarter, existing-home
sales should hold in a narrow range before trending up,” Yun says.
The PHSI in the South rose 2.3 percent in November to 100.7 but is 19.8
percent below a year ago. In the West, the index slipped 2.1 percent to
86.6 but is 18.5 percent lower than November 2006. The index in the
Midwest fell 4.1 percent in November to 82.1 and is 18.6 percent below a
year ago. In the Northeast, the index dropped 13.0 percent in November
to 70.1 from a spike in October, and is 19.1 percent below November
2006.
Existing-home sales for 2007 will probably total 5.66 million, the fifth
highest on record, then edge up to 5.70 million this year and 5.91
million in 2009, compared with 6.48 million in 2006. Existing-home
prices for 2007 are likely to be down 1.9 percent to a median of
$217,600, hold even this year and then rise 3.1 percent in 2009 to
$224,400.
“Rising home prices in the affordable midsection of the country are
likely to offset declines in some of the previously hot markets,” Yun
says.
There are wide variations in housing market conditions around the
country, with nearly two-thirds of the metropolitan areas showing price
gains. Healthy increases in metro prices are occurring in places such as
Pittsburgh; Beaumont-Port Arthur, Texas; San Jose, Calif.; and Bismarck,
N.D.
“Our consumer survey shows buyers today are in it for the long-haul,
planning to stay in their home for a median of 10 years. This is a wise
approach to housing because the data shows the longer you own, the
better your investment,” Yun says.
New-home sales are projected at 773,000 for 2007, and declining to
669,000 this year before rising to 730,000 in 2009, but well below the
1.05 million 2006. With an appropriate slowdown in production, housing
starts, including multifamily units, are forecast at 1.36 million for
2007 and 1.09 million this year before edging up to 1.10 million in
2009; starts totaled 1.80 million in 2006. The median new-home price
should drop 2.1 percent to $241,400 for 2007, and then rise 0.4 percent
to $242,200 this year and gain another 5.9 percent in 2009.
“Some policy changes, such as raising the loan limit on conventional
mortgages, would provide a significant boost to home sales, increase
liquidity, strengthen home prices and lessen foreclosures, but it is
unclear as to if and when the measure will be implemented,” Yun says.
NAR strongly supports raising the Government-Sponsored Enterprise loan
limit to at least $625,000 from the current $417,000 so that more
consumers will have access to lower interest rates on safe conforming
mortgages. “NAR estimates that raising the GSE loan limit will result in
interest rates savings for an additional 330,000 homeowners,” he says.
NAR also encourages the Fed to make a single lump-sum cut in the Fed
funds rate to 3.5 percent at the January Federal Open Market Committee
meeting, rather than a series of modest cuts throughout the year.
“Consumers are also looking to market-time interest rates, and the
expectations of further rate cuts are pushing some home buyers to
delay. Monetary policy will be much more effective with a one-time
large cut, rather than a series of small cuts,” Yun added.
The 30-year fixed-rate mortgage is expected to rise slowly to the 6.3
percent range by the end of this year, but an additional cut in the Fed
funds rate would lower short-term interest rates.
Growth in the U.S. gross domestic product (GDP) is seen at 2.1 percent
in 2007, below the 2.9 percent growth rate in 2006; GDP growth will
probably be 2.0 percent this year.
After averaging 4.6 percent for both 2006 and 2007, the unemployment
rate is estimated to rise to 5.3 percent in the second half of 2008.
Inflation, as measured by the Consumer Price Index, is projected at 2.9
percent for 2007 and 3.1 percent this year; it was 3.2 percent in 2006.
Inflation-adjusted disposable personal income is forecast to grow 3.1
percent for 2007, the same as in 2006, and then grow 1.6 percent this
year.
© 2008 FLORIDA ASSOCIATION OF REALTORS
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