Housing Forecast Changed Slightly Due to Impact From Tighter Lending
Housing activity this year will be somewhat lower than in earlier forecasts, with clearer analysis of the effects of stricter lending standards and a decline in subprime mortgage origination, according to the latest projections by the National Association of Realtors (R).
Lawrence Yun, NAR senior economist, said one benefit for the market is the disappearance of speculative behavior, which contributed to abnormal price growth. "Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time," Yun said.
"Housing first and foremost is shelter. Second, it's a long-term investment that slowly builds the greatest amount of wealth for most families. It's good that we're getting beyond the tendency of some buyers to view housing as a temporary asset to accumulate short-term wealth, which is not to be expected in a normal market."
Existing-home sales are likely to total 6.29 million this year and 6.49 million in 2008, compared with 6.48 million last year. New-home sales are projected at 864,000 in 2007 and 936,000 next year, lower than the 1.05 million in 2006. Housing starts should total 1.46 million units this year and 1.52 million in 2008, down from 1.80 million last year.
"If it weren't for a favorable economic backdrop, housing would probably have a hard landing. As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later," Yun said.
The 30-year fixed-rate mortgage should rise slowly to 6.5 percent by the fourth quarter. Last week, Freddie Mac reported the 30-year rate was 6.16 percent.
The national median existing-home price is forecast to slip 1.0 percent to $219,800 this year, and then rise 1.4 percent in 2008. The median new-home price is expected to be essentially unchanged at $246,400 in 2007, and then rise 2.2 percent next year.
The unemployment rate will probably average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is estimated to decline to 2.5 percent in 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is projected at 2.1 percent in 2007, lower than the 3.3 percent growth last year. Inflation-adjusted disposable personal income should rise 2.6 percent in 2007, the same as last year.
The National Association of Realtors(R), "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
Existing-home sales for April will be released May 25; the Pending Home Sales Index is scheduled for June 1 and the next forecast will be June 6.
Information about NAR is available at http://www.realtor.org/. This and other news releases are posted in the News Media section. Statistical data, tables and surveys also may be found by clicking on Research.
REALTOR (R) is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS (R) and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS (R). All REALTORS (R) are members of NAR.
Source: National Association of Realtors