Lawrence Yun, chief economist for the
National Association of Realtors® (NAR) said Thursday it might be time to "dial
down the credit stringency." If the
credit scores required for a mortgage returned to the more normal levels of
about 720 for conventional loans and 660 for FHA loans, he said, home sales
could be 15 to 20 percent higher than they are.
During the past four years the average scores for approved conventional
loans have been in the 760 to 770 range.
About 51 percent of renters could
qualify financially to purchase a home compared to 24 percent in 2005 and 33
percent in 2000. While their credit
scores are unknown, "there are about 8 million more renters with the income
necessary to buy a home now than in 2000, but they are choosing not to or are
unable to become a homeowner" Yun said.
Yun, speaking at a residential real
estate forum during the Realtors Midyear Legislative Meetings in Washington,
said, "Steady job creation and household formation have been helping to unleash
a pent-up demand in the housing market.
Lagging house starts and a continuing housing shortage means home prices
will rise further." He projects that
mean home prices will be up a cumulative 13 percent over the next two years. That will add more than $2 trillion to
home sales are continuing to improve but inventory constraints are preventing
stronger growth. Existing home sales
rose 9.4 percent to almost 4.3 million in 2012 and are forecast to increase to
nearly 5.0 million this year. Yun said
he expects 5.3 million sales in 2014 and 5.7 million in 2015.
More new home construction is likely to
modulate the growth in prices. Yun said
that right now inventory is bouncing near 13-year lows but some relief will
occur later in the year. He said he
expects most of the 13 percent price increase to be front loaded in 2013 with
about 5 percent occurring next year.
LaVaughn Henry, vice president and
senior regional officer at the Federal Reserve Bank of Cleveland said that all
housing measures are pointing to a solid and sustainable recovery with an
alignment of fundamentals of what makes housing work. The ratio of home prices
to rents indicates that home prices have recovered to a fair value and builders
are responding to higher demand by gradually rebuilding the diminished supply.
Henry said that housing has always led
an economic recovery but he hopes that this time it can boost it into a
stronger recovery. "Growth in the Gross
Domestic Product is running at about half speed for tis point in the recovery,"
he said. Fiscal austerity is a drag on
growth in the short term, but it's important to get control of debt.