The National Association of Realtors (NAR) forecasts a steady housing market for the next few months with a gradual rise in new- and existing-home sales later on this year and well into 2009.
However, the trade group says the opposing forces of pent-up demand from 4 million jobs added to the economy during the past two years versus buyers holding back on purchases makes it difficult to predict exactly when a full recovery will take place.
"While there are more people with financial capacity now than in 2005, many are trying to market-time their purchase," said Lawrence Yun, NAR's chief economist.
"As a result, the exact timing and the strength of a home-sales recovery is a bit uncertain," Yun explained. "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008," he concluded.
The NAR projects new-home sales at 773,000 for 2007, with a decline to 669,000 this year before rising to 730,000 in 2009. Even with a modest recovery in 2009, that's still well below the 1.05 million sales the industry recorded in 2006.
Housing starts, including multifamily units, are forecast at 1.36 million for 2007 and 1.09 for 2008 with a slight jump to 1.10 million in 2009. Starts totaled 1.80 million in 2006. The median new-home price should drop 2.1 percent to $241,400 for 2007 and then rise 0.4 percent to $242,000 this year and gain another 5.9 percent in 2009.
Yun said 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.
The NAR supports raising the government-sponsored enterprise loan limit to at least $625,000 from the current $417,000. Adjusting the loan limit should allow more consumers to have access to lower interest rates on safe, conforming mortgages.
The NAR also encourages the Fed to make a single lump-sum cut in the Fed funds rate to 3.5 percent at the Federal Open Market Committee meeting later this month, as opposed to a series of modest cuts throughout the year.
"Consumers are looking to market-time interest rates, and the expectations of further rate cuts are pushing some home buyers to delay," Yun said.