Realtor Economist Has Rosy Outlook

The NAR usually looks at the housing market through rose-colored glasses, and this year's market forecast is pretty rosy. Despite local conditions that has shown better than a 30% drop in sales, record numbers of listings on the market leading up to the Christmas slowdown, a rise in foreclosure activity, and a (slight) drop in prices when measured within the individual neighborhoods; the national association continues to maintain that the so-called bottom has been reached and the future looks pretty good.

To be fair and balanced... there is an uptick in activity since the first of the year, but this may be a little pent-up demand from the normal holiday slowdown. The numbers of listings coming on the market has risen, but this also may be the result of normal post-holiday activity. Some buyers, groundhog-like, have poked their heads out of the hole but they saw their shadow in my opinion, and a longer winter in housing is indicated than the Realtor economist shows by his comments in the following article.

I am cautious by nature. That's what my clients like about me. There are buyer opportunities for serious buyers, and as always sellers should price in the land of reality and not in fantasyland.

~~ Ray

Realtor forecast calls for home-price growth below 2%
Wednesday, February 07, 2007
Inman News

Existing-home sales are expected to drop slightly this year compared to 2006, according to the latest National Association of Realtors housing market forecast, and to rise in 2008.

There were 6.48 million existing-home sales in 2006, which is the third-highest sales total on record. This year the association projects 6.48 million existing-home sales, followed by 6.64 million sales in 2008.

New-home sales, after reaching the fourth-highest level on record at 1.06 million in 2006, are projected to fall to 961,000 this year and then rise to 971,000 in 2008.

David Lereah, chief economist for the Realtor group, said in a statement, "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008. New-home sales should continue to slide, but we look for that sector to turn around later in the year."

While home sales "may appear weak in comparison with the record surge in 2005," Lereah said that sales "will be sustained at historically high levels."
Housing starts are expected to total 1.52 million in 2007, down from 1.8 million units in 2006, and then increase to 1.56 million next year, according to the forecast. "When new-home demand begins to catch up with supply, builders will slowly increase construction -- probably in the second half of this year," Lereah stated.

The 30-year fixed-rate mortgage is forecast to rise to 6.7 percent by the second half of the year. Freddie Mac reported the 30-year fixed rate at 6.14 percent in December, and it has been trending up since. "Mortgage interest rates remain favorable, and a gradual rise means potential buyers have some time to weigh purchase decisions," Lereah said. "When existing-home supplies become more balanced between buyers and sellers this spring, we'll see some modest price gains."

The national median existing-home price is expected to rise 1.9 percent to $226,200 in 2007, after rising 1.1 percent in 2006. The median new-home price is expected to increase 1.8 percent to $249,800 in 2007, and in 2008 existing-home prices are forecast to rise 3.2 percent while new-home prices are forecast to rise 3.4 percent.

The unemployment rate is expected to average 4.7 percent in 2007, compared with 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is projected at 2 percent this year, down from 3.2 percent in 2006, while growth in the U.S. gross domestic product is expected to be 2.8 percent in 2007, down from 3.4 percent in 2006. Inflation-adjusted disposable personal income will probably rise 3.7 percent in 2007, up from a gain of 2.7 percent in 2006.