Home sales may rise modestly before broader upturn in second half of 2008MortgagePress.comNational Association of Realtors, home sales, statistics, Pending Home Sales Index, Lawrence Yun
A modest gain in the level of home sales is possible over the
next couple months, and an improvement is forecast for the second
half of this year as more buyers are able to access affordable
mortgages, according to the latest forecast by the National
Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based
on contracts signed in April, rose 6.3 percent to 88.2 from a
reading of 83.0 in March. It's the highest index since last
October, but remains 13.1 percent lower than April 2007 when it
stood at 101.5.
"Bargain hunters have entered the market en masse, especially in
areas that have experienced double-digit price declines, but it's
unclear if they are investors or owner-occupants," said Lawrence
Yun, NAR chief economist. "Sharp price reductions are leading to a
quicker discovery of price equilibrium points. The West is already
seeing year-over-year gains in pending contracts."
The PHSI in the West rose 8.3 percent to 98.8 in April and is
4.0 percent higher than April 2007. In the Midwest, the index
jumped 13.0 percent to 83.7 in April but remains 13.1 percent below
a year ago. The index in the South increased 4.6 percent to 88.8
but is 22.5 percent below April 2007. In the Northeast, the index
declined 1.9 percent in April to 79.3 and is 12.2 percent below a
year ago.
"It appears that more buyers are realizing they can take
advantage of a favorable combination of mortgage interest rates,
home prices and family income, said NAR President Richard F.
Gaylord, a broker with RE/MAX Real Estate Specialists in Long
Beach, Calif. "Overall affordability conditions are the best weve
seen since the middle of the housing boom in 2004, but with far
more choices and much less pressure than buyers experienced four
years ago to make an investment in their future. Recent declines in
mortgage rates on conforming jumbo loans and a return to sound but
not overly stringent underwriting standards will permit more people
to qualify for a loan."
NAR's housing affordability index has been trending up this year
and is projected to rise 15 percentage points to 128.0 for all of
2008.
"Although mortgage interest rates will remain historically
favorable, they will start to steadily inch up," Yun said. The
30-year fixed-rate mortgage should rise gradually to 6.3 percent by
the end of this year, and then hold at that level for most of
2009.
Yun said the underlying fundamentals point to a pent-up demand.
"Home sales are at about the same level as they were 10 years ago,
yet the population has grown by 25 million people and we have over
10 million more jobs," he said. "The housing market has been
underperforming by historical standards, partly because buyers were
hampered by mortgage availability issues, but that's improved and
an upturn is more likely. On the other hand, it's unclear what role
consumer confidence will play in the coming months."
Existing-home sales should increase from an annual pace of 5.05
million in the second quarter to 5.83 million in the fourth
quarter. For all of this year, existing-home sales are expected to
total 5.40 million, and then rise 6.3 percent to 5.74 million in
2009. "Sales gains will be greatest in areas that underwent sharp
price declines," Yun said.
After unprecedented home price declines in the first half of the
year, many markets can anticipate stabilizing price trends in the
second half. The aggregate median existing-home price is likely to
decline 8.4 percent in the first half of this year, and then begin
to stabilize in the second half before rising 4.4 percent next year
to $213,900. "Policymakers need to be attentive to the fact that
many homeowners have seen a reduction in housing equity, or are in
an underwater situation. More needs to be done on the policy front
to alleviate hardships and bring fence-sitters back into the
marketplace," Yun said.
A great mix of conditions continues around the country. "We're
seeing healthy price gains in moderately priced areas like Erie,
Pa., and Corpus Christi, Texas, and double-digit gains in others,"
Yun said. "Our most recent data shows sales rising strongly from a
year ago in some areas that experienced sharp price drops,
including Detroit and Las Vegas."
New-home sales will probably fall 31.7 percent to 529,000 in
2008 before rising 12.5 percent to 595,000 next year. Housing
starts, including multifamily units, are projected to drop 27.2
percent to 987,000 this year, and then slip 0.6 percent to 980,000
in 2009.
"Rising construction costs will provide less room for price cuts
on new homes," Yun said. The median new-home price is forecast to
decline 3.1 percent to $239,500 in 2008, and then rise 5.4 percent
next year to $252,400.
Yun sees an improving economy. Growth in the U.S. gross domestic
product (GDP) should be 1.7 percent in 2008 and 2.0 percent next
year. The unemployment rate is estimated to average 5.3 percent
this year and 5.6 percent in 2009.
Inflation, as measured by the Consumer Price Index, is expected
to be 3.6 percent this year and 2.4 percent in 2009.
Inflation-adjusted disposable personal income should grow 1.4
percent in 2008 and 2.5 percent next year.
For more information, visit www.nar.org.
