Here's the good news we've been waiting for in the housing market!
Lawrence Yun of the National Association of Realtors published this article in the September 2007 issue of REALTOR magazine.
"The Signs Align"
PREDICTIONS ARE ALWAYS RISKY, BUT I'M going out on a limb to say exiting-home sales will improve markedly by the fourth quarter. Here's why:
Pent-up demand. The country has added nearly 4 million jobs since home sales started cooling in mid-2005, and the typical worker's wages have risen 7 percent, leading to a $1.35 trillion rise in aggregate national income. At the same time, wealth has grown significantly, with the Dow Jones Industrial Average hovering at record highs. Indeed, accumulated household wealth as of the first quarter was at a record $56.2 trillion. So, if you're wondering if people have the means to purchase, they do.
Delayed household formation. The number of households typically grows by up to 1.5 million a year, but in the first quarter, the year-over-year figure was only half a million. That weak performance suggests people are holding back because of uncertainty over the future, a trend that fuels pent-up demand.
Rising rents. With renters hesitating to buy, landlords are raising rents. Average rents rose 8 percent in the past two years. As renters start feeling squeezed, ownership will look increasingly good.
Condos make modest gains. The condo market has outperformed the single-family market i sales and price changes since early this year. Single-family homes could follow suit.
Better mortgage quality. Mortgage applications for home purchases have been rising nearly 10 percent on a year-over-year basis since May. This data, from the Mortgage Bankers Association, focuses mainly on applicants for prime and FHA loans, so the rise indicates a flight to quality.
Dollar weakness. The falling dollar has dangled as a big "For Sale" sign in front of property attractive to foreign buyers. Europeans can now buy a vacation home at essentially a 15 percent discount. That's good for sales. And despite the weak dollar, which usually leads to higher interest rates, mortgage rates remain attractive at around 6.7 percent.
2008 rate cut. Inflation looks to slide as the year proceeds. If it does, the Federal Reserve could lower interest rates, possibly as soon as early 2008.
So, keep your eyes on the horizon. There are forces at play that will turn the market around, and buyers who make the commitment now could be smiling next year.
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REALTOR.org.
