The nation’s housing market is likely to recover from its slump this year, despite unusual weather and subprime lending issues that create “challenges” in assessing market conditions, the National Association of Realtors says in its monthly forecast.
“Underlying trends point to a housing recovery in 2007, but it will take a couple months for us to get a better handle on it,” said David Lereah, the NAR’s chief economist. “Existing-home sales are expected to slowly improve from what appears to be the cyclical low last fall, but we think there will be some additional pain in the new-home market, which hopefully will start to rise later in the year.”
Among the forecast’s highlights:
* Existing-home sales are projected at 6.42 million this year and 6.66 million in 2008, compared with last year’s 6.48 million. The NAR’s Pending Home Sales Index (PHSI), a leading indicator based on contracts signed, fell 4.1 percent in January to 108.7 points – the second-highest reading since August, after December’s 112.3.
* New-home sales are forecast at 950,000 in 2007 and 981,000 next year, down from 1.06 million in 2006. Housing starts are expected to total 1.50 million this year and 1.56 million in 2008, down from 1.80 million units last year.
* The median sale price for existing homes is expected to rise 1.2 percent to $224,500, after gaining 1.0 percent in 2006.
* The 30-year fixed-rate mortgage is expected to rise to 6.7 percent by the end of the year from the 6.14 percent rate reported last week by Freddie Mac.
* The unemployment rate will probably average 4.7 percent, edging up from last year’s 4.6 percent. Inflation, as measured by the Consumer Price Index, is forecast at 2.1 percent in 2007, down from 3.2 percent in 2006, while the U.S. gross domestic product is expected to grow 2.5 percent, lagging last year’s 3.3 percent gain.
* Inflation-adjusted disposable personal income is expected to rise 3.1 percent in 2007, outpacing its 2006 gain of 2.6 percent.
“Lending problems in our nation’s subprime marketplace … could inhibit future housing activity and further dampen our forecast,” Lereah said, but are not expected to spill over into the prime lending market.
“With soft home prices and lower interest rates, affordability has improved for home buyers,” headded, “and that is encouraging them to get into the market.”
Additional information is available at www.realtor.org .
