NAR Says Home Sales, Prices To Rise This Year

Wahington, DC, May 16, 2008--Home sales and prices throughout most of the country are poised for improvement in the second half of 2008, and the recovery will vary by market, Lawrence Yun, chief economist for the National Association of Realtors said Thursday during NAR’s Midyear Legislative Meetings & Trade Expo.

Middle-America cities that performed evenly over the past few years – like Cincinnati, Milwaukee and the Kansas City, Mo., area – are likely to experience home price gains in the 20 to 30 percent range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.

Yun blamed most of the softening of the housing market over the last year on the “subprime mess,” where consumers with blemished credit records got loans they couldn’t afford when the interest rates reset to higher levels.

“In fact, if you look at where home prices fell the most, it’s the markets were subprime loans were prevalent,” Yun said. Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with a high percentage of subprime lending and where the markets suffered the biggest downturns, he explained.

“It’s important to keep things in context,” he said. “While much of the media is focusing on the fact that the rate of foreclosures doubled this year from historic averages, the foreclosure rate has gone from 1 percent of all homeowners with mortgages to 2 percent. Foreclosures are being driven principally by subprime loans.”

He further explained that more than half of today’s foreclosures are concentrated in the subprime market. The great majority of homeowners are making their mortgage payments on time.

Now that the subprime market has dried up, and loans insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac are making a comeback, the housing markets will strengthen and prices are likely to begin a steady uptick in the coming months, Yun said.