The housing market will remain in hibernation this winter and, without the benefit of a federal home buying tax credit, keep snoring right on through the spring, according to two recent studies.
However, by the third quarter of 2011, pent up demand could stir the market from its slumber and generate a modest, groggy recovery.
During its recent NARdigras 2010 Realtor Conference and Expo, the National Association of Realtors (NAR) forecast an "uneven recovery" next year.
"Existing-home sales have shown some improvement, but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," said Lawrence Yun, NAR chief economist.
"Tight credit and appraisals coming in below a negotiated price continue to constrain the market. Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves," Yun said.
Likewise, the recent "Fiserv Case-Shiller Home Price Insight" reported that the home buyer tax credit delayed the housing market's slide to the bottom, and that will put off the recovery until late 2011.
Fiserv and Moody's Economy.com expect that home prices will drop over the next four quarters in nearly all metro markets, before prices have a shot at stabilizing by the end of 2011.
"Some of the largest declines in prices will occur in markets that had strong spring and summer 2010 price increases," said David Stiff, chief economist at Fiserv. "This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels," Stiff added.
According to NAR, Existing-home sales, down 21.2 percent year-over-year in the third quarter this year, are forecast to drop 24.7 percent in the last quarter this year. The declines reflect the absence of the federal home buying tax credit, available this time last year, NAR said.
Next year, expect smaller sales declines of about 7 percent during the first two quarters, before sales begin to rebound with a near 26 percent year-over-year increase in sales, according to the forecast.
"We’ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the (housing) market once the economy gathers momentum," Yun said.
Yun said existing home sales will rise from 4.8 million this year to 5.1 million next year while housing starts are expected to rise to 716,000 in 2011 from 598,000 this year. Housing starts bottomed out at 554,000 in 2009.
The boost in sales and starts is related to favorable growth in the Gross Domestic Product. NAR says it should grow 2.0 to 2.5 percent over the next two years. A projected and much needed 1.5 million additional jobs over the next two years will push the unemployment rate down to 8 percent by 2013, but it won't return to a normal level of about 6 percent until 2015.
Mortgage interest rates are at record lows now, but by the time housing market recovery is under way, they are expected to rise, creating an average 4.9 percent next year, and 5.8 percent in 2012, Yun said.
Median prices for existing homes, nationwide at $177,100 in the third quarter this year (down 0.6 percent a year ago) are expected to continue to decline to $165,900 into the first quarter 2010, before managing $178,900 by the third quarter next year, an expected peak for the year.
New home prices, $218,000 in the third quarter, 2010 (up 2.5 percent from a year ago), are expected to continue rising each quarter in 2011 and peak out at $224,300 in the fourth quarter.
Broderick Perkins Realty Times, December 23, 2010
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