No Housing Turnaround for Two Years?

First, it was the second half of 2007. Then it was 2008. Now analysts are saying the national housing market may not rebound until 2009. On July 25, the National Association of Realtors reported that sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million units, contributing to the bleak-and-getting-bleaker outlook.
Mixed Signals Confuse Buyers. The NAR believes consumer psychology is to blame. "Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate," said NAR Senior Economist Lawrence Yun in a statement. Rising mortgage rates and tighter lending standards aren't helping, either, Yun said. According to Freddie Mac (FRE), the national average commitment rate for a 30-year fixed-rate mortgage rose to 6.66% in June, from 6.26% in May.
Two "bright spots" in June, Yun said, are the decline in housing inventory and the "modest gain" in home prices. Total housing inventory fell 4.2% in the month, to 4.2 million existing homes for sale, representing a supply of 8.8 months. In the same period, the national median existing-home price edged up 0.3% year-over-year, to $230,100. For single-family homes, the median price rose only 0.1%.
"This increase is an aberration," says Patrick Newport, an economist with Global Insight in Waltham, Mass. "Current inventory levels make it almost a sure thing that prices will continue to slide." On July 11 the NAR said existing-home prices would recover in 2008, rising 1.8%, to a median of $222,700 after a 1.4% decline this year. But Newport thinks otherwise. "Our view is that the downturn [in sales] will continue into 2008," he says. "Given the level of unsold homes, however, nominal home prices will probably not rebound until 2009." ...more