Stable Existing-Home Sales Expected in Early 2008, Then Gradual Rise
WASHINGTON, Jan. 8 /PRNewswire/ -- 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(R).
Lawrence Yun, NAR chief economist, said 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 said. "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 said.
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 said.
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 said.
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 said. 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 said.
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.
The National Association of Realtors(R), "The Voice for Real Estate," is
America's largest trade association, representing more than 1.3 million
members involved in all aspects of the residential and commercial real estate
industries.

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