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NAR Delivers Upbeat Forecast for 2008

January 16, 2008  |  from Construction Jobs Blog

Last week, the National Association of Realtors (NAR) released their latest forecasts for 2008.  While not predicting a significant jump out of this slowdown, they do expect a gradual turnaround in 2008.

Lawrence Yun, NAR Chief Economist, said “There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase.  As a result, the exact timing and strength of a home sales recovery is a bit uncertain.  A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008.”

Making it even harder to predict is the fact that there are “wide variations of housing market conditions around the country.”  National home price averages are likely to experience rising home prices in some locations offsetting declines in previously hot markets.

Read more for NAR’s numerical predictions and policy suggestions for the FED

New-home sales are expected to decline to 669,000 this year from 773,000 in 2007, then jump back up to 730,000 in 2009.  For context, 2006 saw a staggering 1.05 million new-home sales.  The median new-home price will drop 2.1 percent to $241,400 for 2007, and rise .4 percent this year to $242,200.  2009 should experience a 5.9 percent gain.

Yun also outlined some policy suggestions for the Fed:

“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.  NAR strongly supports raising the Government-Sponsored Enterprise loan limit to at least $625,000 from the current $417,000 so that more consumers will have access to lower interest rates on safe conforming mortgages.  “NAR estimates that raising the GSE loan limit will result in interest rates savings for an additional 330,000 homeowners,” he said.

NAR also encourages the Fed to make a single lump-sum cut in the Fed funds rate to 3.5 percent at the January Federal Open Market Committee meeting, rather than a series of modest cuts throughout the year.  “Consumers are also looking to market-time interest rates, and the expectations of further rate cuts are pushing some home buyers to delay.  Monetary policy will be much more effective with a one-time large cut, rather than a series of small cuts,” Yun added.

Filed: Industry-Outlook