Sunday, June 15, 2008
Stats and forecasts
It's that time of the year - the mid-point - when all of the forecasters do an update and mid-year forecast correction for the rest of 2008. The article below came from the news feed that I get from the National Association of Realtors.
A modest gain in the level of home sales is possible over the next couple months, and an improvement is forecast for the second half of this year as more buyers are able to access affordable mortgages, according to the latest forecast by the National Association of Realtors®. The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in April, rose 6.3 percent to 88.2 from a reading of 83.0 in March. It’s the highest index since last October, but remains 13.1 percent lower than April 2007 when it stood at 101.5. The PHSI in the West rose 8.3 percent to 98.8 in April and is 4.0 percent higher than April 2007. In the Midwest, the index jumped 13.0 percent to 83.7 in April but remains 13.1 percent below a year ago. The index in the South increased 4.6 percent to 88.8 but is 22.5 percent below April 2007. In the Northeast, the index declined 1.9 percent in April to 79.3 and is 12.2 percent below a year ago.
Lawrence Yun, NAR chief economist, said pending sales contracts have picked up notably in areas undergoing significant price drops. “Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants,” he said. “Sharp price reductions are leading to a quicker discovery of price equilibrium points. The West is already seeing year-over-year gains in pending contracts.”
“Although mortgage interest rates will remain historically favorable, they will start to steadily inch up,” Yun said. The 30-year fixed-rate mortgage should rise gradually to 6.3 percent by the end of this year, and then hold at that level for most of 2009. Yun said the underlying fundamentals point to a pent-up demand. “Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs,” he said. “The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely. On the other hand, it’s unclear what role consumer confidence will play in the coming months.”
Existing-home sales should increase from an annual pace of 5.05 million in the second quarter to 5.83 million in the fourth quarter. For all of this year, existing-home sales are expected to total 5.40 million, and then rise 6.3 percent to 5.74 million in 2009. “Sales gains will be greatest in areas that underwent sharp price declines,” Yun said. New-home sales will probably fall 31.7 percent to 529,000 in 2008 before rising 12.5 percent to 595,000 next year. Housing starts, including multifamily units, are projected to drop 27.2 percent to 987,000 this year, and then slip 0.6 percent to 980,000 in 2009. “Rising construction costs will provide less room for price cuts on new homes,” Yun said. The median new-home price is forecast to decline 3.1 percent to $239,500 in 2008, and then rise 5.4 percent next year to $252,400.
So, there's hope on the horizon for a sustained turnaround in the housing market and perhaps the economy overall. Let's all hope so, since the current market is getting really tiresome. I'm seeing a greatly increased level of activity locally on both the buy and sell sides. There are lots of buyers out right now, trying to scoop up bargains before the market turns. And, sellers have now been inundated with enough news and information about the market that all but the most stubborn are ready to price their homes to sell in the current market.