Improved Sales Activity Seen This Year

January 16, 2008

Home sales will finally start climbing again in 2008. That’s the most recent forecast from economists at the National Association of Realtors. The projection applies to existing (previously owned) homes. Recovery for newly constructed home sales is unlikely before 2009, it was noted in the NAR report.

"The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming," said Lawrence Yun, NAR’s chief economist. "Now that mortgage conditions have improved, some postponed activity should turn up in home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels. The broad trend over the coming year will be a gradual rise in home sales, but because sales have been exceptionally low in the final month of 2007, total sales for 2008 will be only modestly higher than in 2007," he said.

Existing home sales are projected at 5.67 million units in 2007, the fifth highest on record. That number is expected to rise to 5.7 million in 2008, still significantly lower than the 6.48 million homes sold in 2006. Existing home prices are expected to be down by about 1.9 percent in 2007, compared with the previous year.

"Home price growth in the affordable midsection of the country will help raise the national median existing-home price in 2008," Yun said. "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. Even with a modest decline in the national aggregate price in 2007, it’s important to keep in mind that nearly two-thirds of the metro areas are showing price increases. The apparent disparity results from fewer sales in high-cost markets. A change in the mix of sales is dragging down the national median home price."

New home sales are now forecast at 788,000 in 2007, and 693,000 in 2008. Because builders have adjusted production, housing starts will probably total 1.36 million units in 2007 and 1.16 million in 2008, according to the NAR report. On the home financing front, rates for the 30-year fixed-rate mortgage is forecast to rise slowly to 6.4 percent by the end of this year, with additional cuts in the Fed funds rate lowering short-term interest rates.

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