Improvement in
mortgage market
bodes well for
housing in 2008
WASHINGTON –
Oct. 11, 2007
Conditions in
the mortgage
market are
improving for
consumers, which
should help to
release some
pent-up demand
in early 2008,
according to the
latest forecast
by the National
Association of
Realtors® (NAR).
Lawrence Yun,
NAR senior
economist, notes
that widening
credit
availability
will help turn
around home
sales.
“Conforming
loans are
abundantly
available at
historically
favorable
mortgage rates.
Pricing has
steadily
improved on
jumbo mortgages
since the August
credit crunch,
and FHA loans
are replacing
subprime
mortgages,” he
says.
Yun says it’s
important to
place the
current housing
market in
perspective, and
that 2007 will
be the fifth
highest year on
record for
existing-home
sales. “Although
sales are off
from an
unsustainable
peak in 2005,
there is a
historically
high level of
home sales
taking place
this year – a
lot of people
are, in fact,
buying homes,”
he says. “One
out of 16
American
households is
buying a home
this year. The
speculative
excesses have
been removed
from the market
and home sales
are returning to
fundamentally
healthy levels,
while prices
remain near
record highs,
reflecting
favorable
mortgage rates
and positive job
gains.”
He emphasizes
all real estate
is local with
naturally large
variations
within a given
area. “Markets
like Austin,
Salt Lake City
and Raleigh have
been
outperforming
recently and
will continue to
do well next
year,” Yun says.
“Other areas
like Denver and
Wichita will
likely move up
in the price
growth rankings
due to very
positive local
economic
developments.”
Existing-home
sales are
expected to
total 5.78
million in 2007
and then rise to
6.12 million
next year, in
contrast with
6.48 million in
2006. New-home
sales are
forecast at
804,000 this
year and 752,000
in 2008, down
from 1.05
million in 2006;
a recovery for
new homes will
be delayed until
next spring.
“A cutback in
housing
construction is
a positive sign
for the market
because it will
help lower
inventory and
firm up home
prices,” Yun
says. Housing
starts,
including
multifamily
units, are
likely to total
1.37 million in
2007 and 1.24
million next
year, down from
1.80 million in
2006.
NAR President
Pat V. Combs
says, “Housing
is still a good
long-term
investment, and
we’ll be seeing
a broad, modest
improvement in
home prices in
2008. With
widely varying
conditions, the
best advice for
consumers is to
consult a
Realtor in their
area to learn
about local
market
conditions
because supply
and demand can
change from one
neighborhood to
the next.”
Existing-home
prices will
probably slip
1.3 percent to a
median of
$219,000 in 2007
before rising
1.3 percent next
year to
$221,800. The
median new-home
price should
drop 2.1 percent
to $241,400 this
year, and then
increase 1.0
percent in 2008
to $243,900.
The 30-year
fixed-rate
mortgage is
expected to
average 6.4
percent for the
next two
quarters and
then edge up to
the 6.6 percent
range in the
second half
2008. Additional
cuts expected in
the Fed funds
rate will help
to keep mortgage
interest rates
historically
favorable.
Growth in the
U.S. gross
domestic product
(GDP) is
estimated at 2.0
percent this
year, below the
2.9 percent
growth rate in
2006; GDP is
likely to grow
2.7 percent next
year.
The unemployment
rate is forecast
to average 4.6
percent this
year, unchanged
from 2006.
Inflation, as
measured by the
Consumer Price
Index, is
expected to be
2.8 percent in
2007, compared
with 3.2 percent
last year.
Inflation-adjusted
disposable
personal income
will probably
increase 3.6
percent in 2007,
up from 3.1
percent last
year.
©
2007 FLORIDA
ASSOCIATION OF
REALTORS
