Realtors, normally a sunny lot, have been markedly subdued of late, for good reason. On Friday afternoon, however, some sunshine returned to their collective disposition with the release of a forecast the National Association of Realtors characterized as "hopeful" at its annual convention and expo in San Deigo.
"Aided by the home buyer tax credit, the outlook for housing and the economy appears headed for a sustainable recovery," said the NAR.
The key word there was "headed." For this year, the NAR is now predicting existing-home sales of 5.01 million, a gain of 2% over last year, which was miserable. However, in 2010, the Realtors are forecasting an increase of 13.6% to 5.69 million.
Similarly, the NAR thinks new single-family home sales will come in at 397,000 this year but jump 38.2% to 549,000 in 2010 after ending 2009 down 18.1% from the prior year. Housing starts, including multifamily units, should total 564,000 units this year but grow 33% to 752,000 in 2010. Single-family starts should be up 34% to 598,000.
Prices should be up as well, the NAR said. "We've seen a steady downtrend in housing inventory for well over a year and home prices appears to be in the early stages of stabilizing," said Lawrence Yun, NAR chief economist. "With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3% and 5% in 2010, but with wide geographic differences."
Yun said the sunnier projections were triggered by the new home buyer tax credit. "Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices," he said. "In fact, the credit is working better than first projected--it now looks like we¹ll have 2.3 to 2.4 million first-time buyers this year."
According to a new study released Friday by NAR, first-time buyers accounted for a record 47% share of home sales over the past year, up from 41% in the2008 survey and from 36% in 2006.
The Realtors are forcasting rates averaging 5.3% for a 30-year fixed-rate mortgage through the end of the year, then rising gradually to 5.8% by the end of next year. The NAR¹s housing affordability index is expected to set a record in 2009, averaging 30 percentage points higher than 2008, before affordability will decline as prices improve.
Yun said he expects 2.5% growth in the U.S. GDP for the rest of this year and 2.8% next year. He said he believes the unemployment rate is close to peaking and is projected to ease to 9.5% by the end of next year.
"The size of the U.S. budget deficit is a concern going forward, and carries the risk of higher inflation," Yun said. "At this point, that risk appears to be restrained."
He is predicting the Consumer Price Index to fall 0.4% this year, then rise 1.6% in 2010. Inflation-adjusted disposable personal income is estimated to grow 0.4% this year and 1.2% next year.