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REALTOR®: NAR Projects Existing-home Sales to Remain Steady, Then Begin Upward Trend

Monday, February 11, 2008

The National Association of REALTORS® predicts soft market conditions for existing-home sales will continue in the months ahead, but expects some improvement by the second half of this year, as loan limits are increased.

According to NAR chief economist Lawrence Yun, sales activity is expected to remain soft through the first half of the year despite low mortgage interest rates. “Household formation was only half of what it should have been last year given the demographics of a growing population and sustained job growth, so there clearly is a pent-up demand from buyers who are on the sidelines,” he said.

“Existing-home sales have moved narrowly since last September, but when the full impact of higher loan limits for conventional mortgages begins to impact the market, there is likely to be a notable rise in home sales and prices. If higher limits are enacted very quickly, we’ll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas – that, in turn, would help to stimulate overall economic activity.”

The recent passage of the national economic stimulus package by Congress was welcomed by Realtors as well, including members of the San Mateo County Association of REALTORS®, a professional trade organization representing over 3,800 REALTORS® and affiliate members engaged in the real estate business in San Mateo County. SAMCAR promotes the highest ethical standards of real estate practice and serves as an advocate for homeownership and homeowners.

“Increasing the conforming loan limits will benefit families who live in areas where the price of housing is beyond the norm. We live in such an area. The economic stimulus package will also help stabilize the economy,” said SAMCAR President Sue Walsh.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in December, slipped 1.5 percent to a reading of 85.9 from a downwardly revised index of 87.2 in November, and was 24.2 percent below the December 2006 level of 113.3. “We’re seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly,” Yun said.

The PHSI in the Midwest rose 3.4 percent in December but is 17.3 percent below a year ago. In the Northeast, the index slipped 1.7 percent and is 26 percent lower than December 2006. The index in the South fell 3 percent in December and is 27 percent below a year ago. In the West, the index declined 3.1 percent in December and is 24.1 percent below December 2006.

Robert A. Kleinhenz, deputy chief economist of the California Association of REALTORS®, attributed the decline in sales and median price in California to the credit or liquidity crunch, noting buyers who otherwise could and would buy a home at this time are having difficulty acquiring funding for loans.

San Mateo County is one of the markets in California that appears to be holding its own. Walsh maintains a positive outlook about the local market in 2008 and she believes homes in the area will maintain their value and increase due to pent-up demand and a limited supply of housing in the area.

“This is the time for serious buyers to consider purchasing a home,” said Walsh, a Realtor with Cashin Company in Burlingame. “Sellers, in turn, should prepare their home so they can receive the maximum return. These days, buyers don’t want to do the work. They don’t have the time and are financially stretched that, if priced right, homes in move-in condition will have no problem moving quickly in the market.”

NAR projects existing-home sales to maintain an annual pace of around 4.9 million in the first half of this year, rising notably to 5.8 million in the second half, and totaling 5.60 million for all of 2009. The aggregate existing-home price should decline 1.2 percent in 2008 to a median of $216,300, and then rise 3.2 percent to $223,200 in 2009.

“Areas with a high prevalence of subprime lending will continue to feel downward price pressure. Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices,” Yun said.

Growth in the U.S. gross domestic product is projected at 2.2 percent in 2008 and 2.7 percent in 2009. The unemployment rate should rise to 5.4 percent in the second half of 2008 before averaging 5.2 percent in 2009. Inflation, as measured by the Consumer Price Index, is seen at 2.7 percent this year and 1.4 percent in 2009. Inflation-adjusted disposable personal income is likely to grow 1.7 percent in 2008 and 3.5 percent next year.

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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