NAR - Home Sales May Rise Modestly before Broader Upturn in Second Half of 2008
RISMEDIA, June 10, 2008-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% to 88.2 from a reading of 83.0 in March. It’s the highest index since last October, but remains 13.1% lower than April 2007 when it stood at 101.5.
Lawrence Yun, NAR chief economist, said pending sales contracts have picked up notably in areas undergoing significant price drops. “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,” he said. “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.”
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”
The national median existing-home price for all housing types was $208,600 in May, down 6.3% from a year ago when the median was $222,700.
Lawrence Yun, NAR chief economist, said there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he said. “Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”
Total housing inventory at the end of May fell 1.4% to 4.49 million existing homes available for sale, which represents a 10.8-month supply at the current sales pace, down from a 11.2-month supply in April.
Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.
“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun said. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.04% in May from 5.92% in April; the rate was 6.26% in May 2007.
Single-family home sales rose 1.6% to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5% below the 5.16 million-unit pace in May 2007. The median existing single-family home price was $206,700 in May, which is 6.8% below a year ago.
Existing condominium and co-op sales increased 5.5% to a seasonally adjusted annual rate of 580,000 units in May from 550,000 in April, but are 24.6% lower than the 769,000-unit level a year ago. The median existing condo price4 was $223,400 in May, down 2.1% from May 2007.
Regionally, existing-home sales in the Midwest rose 5.5% in May to a pace of 1.16 million but are 16.5% lower than a year ago. The median price in the Midwest was $165,300, which is 0.7% below May 2007.
In the Northeast, existing-home sales rose 4.6% to an annual rate of 910,000 in May, but are 15.0% below May 2007. The median price in the Northeast was $278,000, down 2.4% from a year ago.
Existing-home sales in the West increased 2.0% to an annual pace of 1.02 million in May, but are 12.8% below a year ago. The median price in the West was $286,600, which is 16.0% lower than May 2007.
In the South, existing-home sales slipped 0.5% to an annual rate of 1.91 million in May, and are 17.0% below May 2007. The median price in the South was $175,000, down 4.3% from May 2007.
For more information, visit www.REALTOR.org.
| May Existing-Home Sales Show Modest Gain RISMEDIA, June 30, 2008-Existing-home sales increased in May with buyers responding to lower home prices, according to the National Association of Realtors®. Existing-home sales-including single-family, townhomes, condominiums and co-ops - increased 2.0% to a seasonally adjusted annual rate of 4.99 million units in May from a level of 4.89 million in April, but are 15.9% below the 5.93 million-unit pace in May 2007. The PHSI in the West rose 8.3% to 98.8 in April and is 4.0% higher than April 2007. In the Midwest, the index jumped 13.0% to 83.7 in April but remains 13.1% below a year ago. The index in the South increased 4.6% to 88.8 but is 22.5% below April 2007. In the Northeast, the index declined 1.9% in April to 79.3 and is 12.2% below a year ago.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the market may be breaking its holding pattern. “It appears that more buyers are realizing they can take advantage of a favorable combination of mortgage interest rates, home prices and family income,” he said. “Overall affordability conditions are the best we’ve 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% 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% 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% in the first half of this year, and then begin to stabilize in the second half before rising 4.4% 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% to 529,000 in 2008 before rising 12.5% to 595,000 next year. Housing starts, including multifamily units, are projected to drop 27.2% to 987,000 this year, and then slip 0.6% 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% to $239,500 in 2008, and then rise 5.4% next year to $252,400.
Yun sees an improving economy. Growth in the U.S. gross domestic product (GDP) should be 1.7% in 2008 and 2.0% next year. The unemployment rate is estimated to average 5.3% this year and 5.6% in 2009.
Inflation, as measured by the Consumer Price Index, is expected to be 3.6% this year and 2.4% in 2009. Inflation-adjusted disposable personal income should grow 1.4% in 2008 and 2.5% next year.
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
For more information, visit http://www.realtor.org. |