NAR Expects Housing Recovery Next Year

Las Vegas, NV, November 13, 2007 - A modest recovery for existing-home sales is expected in 2008 as the impact of the credit crunch subsides, while pending home sales indicate near-term stability, according to the latest forecast released at the National Association of Realtors Conference & Expo.

Lawrence Yun, NAR chief economist, said the housing market will improve from a steady unleashing of pent-up demand, and from a wide abundance of safer mortgage products.

“The level of pent-up demand reaching the market next year is a bit uncertain, and it is possible for even higher home sales activity than we’re forecasting if buyers regain their confidence about the long-term benefits of homeownership,” Yun said.

“Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.”

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in September, rose 0.2% in August. It was 20.4% lower than the September 2006.

“Even with relatively low fourth quarter sales, 2007 will be the fifth highest year on record for existing-home sales. The median existing-home price in 2007 will have fallen by less than 2% from an all-time high set in 2006,” Yun said.

Existing-home sales are projected at 5.67 million this year, edging up to 5.69 million in 2008, in comparison with 6.48 million in 2006 which was the third highest year on record.  Existing-home prices are expected to decline 1.7% to a median of $218,200 for all of this year and hold essentially even in 2008 at $218,300.

“Some markets are still going strong, such as Austin and Raleigh, while others are showing early signs of recovery, like Denver and Boston,” Yun said. ”However, a vast portion of the nation’s mid section is underpriced in relation to income, and prices in some markets could rise notably with good local job gains. At the same time, a significant rise in foreclosures in some areas could delay the recovery.”

New-home sales will probably total 796,000 in 2007 and 693,000 next year, below the 1.05 million last year. No real improvement is seen for new homes until 2009.

“Contrary to perceptions, conventional mortgages are widely available at favorable interest rates for the bulk of home buyers,” Yun said. “The pricing and availability of jumbo mortgages has improved, and FHA loans for home purchases – up 58% in the third quarter – are replacing subprime mortgages to serve the needs of low- and moderate-income buyers.”

The 30-year fixed-rate mortgage should rise slowly to the 6.6% range by the end of next year, although cuts in the Fed funds rate will help short-term interest rates.