Realtors release home sales forecast

The forecast, which uses pending sales activity as an indicator, also shows that existing-home sales are expected to rise later in the year and continue to improve in 2009.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but it remains above the August and September readings, according to a NAR news release. The latest index was 19.2 percent below the November 2006 reading of 108.4.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

NAR Chief Economist Lawrence Yun said in the release that a pull-and-tug cycle is exerting itself on the market.

“On the one hand, we have a pent-up demand from the 4 million jobs added to our economy over the past two years of sales decline,” he said. “On the other, consumers continue to wait for additional signs of market stabilization. There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase.”

As a result, Yun noted, the exact timing of a home-sales recovery is uncertain, but it could happen as early as this spring.

“Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” Yun said.

Existing-home sales for 2007 will probably total 5.66 million, the fifth highest on record, the release said, and they’re expected to edge up to 5.7 million this year and 5.91 million in 2009, compared with 6.48 million in 2006, the release said.

Existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, according to the release.

The forecast anticipates that they’ll hold even in 2008 and rise 3.1 percent to $224,400 in 2009.

“Rising home prices in the affordable midsection of the country are likely to offset declines in some of the previously hot markets,” Yun said.

New-home transactions

New-home sales are projected at 773,000 for 2007, with an expected decline in 2008 to 669,000 and an upswing to 730,000 in 2009. That’s still well below the 1.05 million new-home sales posted in 2006.

Housing starts, including those for multifamily dwellings, are forecast at 1.36 million for 2007 and 1.09 million this year before edging up to 1.1 million in 2009. In 2006, NAR reported 1.8 million housing starts.

“Some policy changes, such as raising the loan limit on conventional mortgages, would provide a significant boost to home sales, increase liquidity, strengthen home prices and lessen foreclosures, but it is unclear as to if and when the measure will be implemented,” Yun said.

He noted that NAR supports raising the government-sponsored enterprise loan limit to at least $625,000 from the current $417,000.

“NAR estimates that raising the GSE loan limit will result in interest rates savings for an additional 330,000 homeowners,” he said.

According to the forecast, growth in the U.S. gross domestic product is seen at 2.1 percent in 2007, below the 2.9 percent growth rate in 2006; GDP growth will probably be 2 percent this year.

NAR will release its next forecast-pending home sales index Feb. 7. [[In-content Ad]]