Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data.
"Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels," Yun said.
NAR's Pending Home Sales Index, a "forward-looking" indicator based on contracts signed in October, increased
0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain.
"The broad trend over the coming year will be a gradual rise in used-home sales," Yun said.
The index in the northeast United States jumped 16 percent in October to 80.6. In the West, the index rose 8.4 percent to 87.3. The index in the Midwest slipped 1.4 percent in October to 85.5. In the South, the index dropped 7.8 percent in October to 91.6.
"The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans," Yun said. "Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability."
Used-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.7 million in 2008. Used-home prices should be down 1.9 percent to a median of $217,600 for all of 2007 and then rise 0.3 percent to $218,300 in 2008.
"Home-price growth in the vast affordable midsection of America will help raise the national median exisitng-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation," Yun said.
"Even with a modest decline in the national aggregate price this year, it's important to keep in mind that nearly two-thirds of the metro areas in the (country) are showing price increases," he said.
Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash.
"We can't emphasis enough how much local conditions vary, even within a given area, so it's important for consumers to make decisions based on local market conditions," Yun said.
New-home sales are forecast at 788,000 this year and 693,000 in 2008. Because builders have correctly adjusted production, Yun said, housing starts, including multifamily units, will probably total
1.36 million this year and 1.16 million in 2008, down from 1.8 million last year.
The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates, Yun said.
Growth in the U.S. gross domestic product, he added, should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year.
The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5 percent in 2008, according to Yun. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of used homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about
20 percent of transactions for used-home sales.
Used-home sales for November will be released Dec. 31.
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source: palmbeachdailynews.com
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