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REALTOR®: NAR Expects Stable Existing-home Sales in Early 2008, then Gradual Rise

Monday, January 14, 2008

The National Association of REALTORS® disclosed it expects existing-home sales over the next few months to hold fairly steady, and then rise later in the year and continue to improve in 2009.

NAR Chief Economist Lawrence Yun 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.”

Yun made his prediction based on the Pending Home Sales Index. The PHSI, a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 in October, but remains above the August and September readings and indicates a broad stabilization.
“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, but is 19.8 percent below a year ago. In the West, the index slipped 2.1 percent, but is 18.5 percent lower than November 2006. The index in the Midwest fell 4.1 percent in November and is 18.6 percent below a year ago. In the Northeast, the index dropped 13 percent in November 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.

There are wide variations in housing market conditions around the country, with nearly two-thirds of the metropolitan areas showing price gains. The NAR reported healthy increases in metro prices are occurring in places such as Pittsburgh; Beaumont-Port Arthur, Texas; San Jose, Calif.; and Bismarck, N.D.

The California Association of REALTORS® has reported the median home price in San Mateo County was $770,000 in November 2007, up 2.67 percent from the median home price of $750,000 in November 2006. Redwood City, with a median home price of $822,500, up 9.67 percent from the same period the previous year, was among the top 10 cities and communities in the state with the highest median home price during November 2007.

San Mateo County housing market figures held their own, even through the month of December 2007, which is usually the slowest month of the year due to the holiday season. Data from MLSListing Inc., the Multiple Listing Service used by the San Mateo County Association of REALTORS® (SAMCAR) reveals in the month of December, sales of single family homes were up in the cities of Colma, Daly City, East Palo Alto, Half Moon Bay, Menlo Park, Moss Beach and South San Francisco, compared with the prior month. Sales actually increased in Hillsborough and Menlo Park, compared with the December 2006 sales figures.

The median sales price of the following cities in San Mateo County increased in December 2007 from November 2007: Atherton, $5,400,000 in December 2007, up from $3,285,000 in November 2007; Belmont, $1,030,500, from $890,000; Brisbane, $1,300,000 from $745,000; East Palo Alto, $550,000 from $412,500; Foster City, $1,215,000 from $1,038,000; Millbrae, $928,000 from $859,000; Moss Beach, $833,000 from $668,000; Redwood Shores, 1,215,000 from $1,108,000; San Bruno, 699,000 from $632,450; Woodside, $2,260,000 from $2,000,000.

Yun said the NAR nationwide 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.”

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,” Yun 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 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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