The National Association of Realtors (NAR) issued its monthly forecast for the housing industry on September 11, offering hope that the current problems in the market will merely postpone an expected recovery in existing home sales until some point in 2008.
Lawrence Yun, senior economist for NAR said that unusual disruptions
are dampening the outlook for home sales, notably for August and September.
"There's been an unusual hit to home sales, starting in March when subprime
problems emerged and more recently when problems spread to jumbo loans, with
many potential buyers on the sidelines.
"However, the jumbo loan market is now beginning to settle, and FHA insured loans are helping to fill the subprime vacuum. The volume of existing home sales this year will be better than 2002, which was the second year of the housing boom."
The report forecast that existing home sales will bottom out at 5.92 million this year and then recover to a level of 6.27 million in 2008. Both of these projections are lower than the 6.48 million in existing home sales achieved in 2006. New home sales are expected to total 801,000 this year and 741,000 in 2008, much lower than the 1.05 million sales achieved last year.
Yun said that "A sharp production pullback by homebuilders deep into 2008 is a healthy trend that will help trim down housing inventory." Housing starts of all sizes including multi-family projects are expected to total 1.37 million units this year and 1.26 million next year. The total in 2006 was 1.80 million units.
When it comes to prices, Yun said that the median price of existing homes will probably lose 1.7 percent to $218,200 in 2007 and then rise 2.2 percent next year to $223,000 while new home prices will drop 2.2 percent to $241,000 in 2007 and then increase to a median of $245,100 in 2008.
According to Yun, "The mortgage markets will calm further in the months ahead, but it's important to underscore the fact that conventional loans - the vast majority of available financing - are available to creditworthy borrowers. Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment."
It is notable that, while Yun went on to discuss other economic indicators such as employment and the Gross Domestic Product, his forecast did not mention the number of projected foreclosures on the market. With some estimates of homes in foreclosure rising as high as 2 million homes over the next year or so, one would expect that NAR would take note and account for the potential impact of this in its forecast.