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REALTOR®: Conditions in Mortgage Market Improving, Should Help Housing in 2008

Monday, October 15, 2007

Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of Realtors® (NAR).

Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he said.
Yun said it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales.

“Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year – a lot of people are, in fact, buying homes,” he explained. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

He emphasized all real estate is local with naturally large variations within a given area. “Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun said. “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.”

The same observation is true in the state of California. Realtor officials have noted, while other parts of California are experiencing a reduction in home sales and prices, the Bay Area continues to lead the state in its performance. San Mateo County Association of REALTORS® (SAMCAR) President Geoffrey Craighead said it’s important to note that the real estate market is local as well as cyclical.

“San Mateo County, with its limited land supply, continues to have more demand for homes than supply,” said Craighead. “There are also places within the county that continue to be good markets, with homes receiving multiple offers, because of the type of neighborhood they are in and good school district.”

Craighead also noted, “Housing is a long-term investment. Through the years, the average appreciation for homes in the area has been about 11 percent. You can’t go wrong purchasing a home in San Mateo County, as long as you intend to live there for a few years.”

Craighead, who owns Craighead Associates in San Carlos, said with widely varying conditions, his best advice for homebuyers and sellers is to consult a Realtor in their area to learn about local market conditions, since supply and demand depend on the local economy and neighborhood.

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun said. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

NAR predicts existing home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800. Nationwide, the median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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