Check out the article below for what the National Association of REALTORSÂ® Chief Economist, Lawrence Yun predicts for 2012 and 2013 projected home sales and why the federal government must not inhibit its growth with tougher restrictions. Do keep in mind that real estate must be viewed on a local level as various municipalities in the country are performing better than others.
NAR Chief Economist Lawrence Yun predicted home sales would increase by 4 percent next year and home prices would inch up 2 percent during the Economic Issues & Residential Real Estate Business Trends forum Friday morning. In 2013, he projected sales to pick up another 6 percent and prices to rise another 3 percent.
Home-sales growth has been flat this year, even though it couldnâ€™t be a better time for consumers to buy, because prices are still downâ€”essentially under replacement valueâ€”and interest rate are at historical lows. Even employment and wages have been heading up, although both at a modest pace.
Yun characterized todayâ€™s market as â€œstrangeâ€ because of this disconnect between the good buying conditions and the low sales growth.
Rock-bottom consumer confidence is a big part of the weak market but the hurdles to borrowers imposed by lenders through stringent underwriting requirements are a major issue, too. Lenders are requiring applicants to have credit scores of about 760 for Fannie Mae and Freddie Mac loans, and just under 700 for FHA loans, shrinking potential home sales by about 20 percent.
The stiff requirements come at a time when banks are seeing strong profits and run counter to the Federal Reserveâ€™s efforts to use rock-bottom interest rates to attract borrowers and get the economy moving.
Behind the tough underwriting is a concern among banks about borrowersâ€™ ability to repay loans, but Yun says that risk is low. Rather than continuing to head down, home prices have been stable for the last two years and are poised to head up, which will reduce lending risks, lower foreclosures, boost sales, and further strengthen the market. Â
To show that home prices have been stable, he cited both NAR and Case-Shiller data, which show prices have been hovering around a $140,000 national median since 2009.
Yun said it was crucial that the federal government not stymie what little momentum the housing market is seeing by moving forward with a proposal to require 20 percent down payments from home buyers or making other destabilizing housing policy shifts. Itâ€™s also crucial for interest rates to stay low, although if lenders return their underwriting to the sound standards they used before the housing boom, he said, the market could handle higher interest rates. Â
Richard Peach, senior vice president at the Federal Reserve Board of New York and the other speaker at the session, offered a unique suggestion to improve the housing sector, one that was particularly suitable for Veteranâ€™s Day: help military personnel who served overseas purchase foreclosed homes.
â€œMy idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a downpayment on a foreclosed home in the Fannie or Freddie portfolio,â€ Peach said.