ANAHEIM, CA—The ever-optimistic National Association of Realtors believes the worst housing downturn since the Great Depression is almost over.
Other housing organizations aren't nearly as effusive. So whether the 1.1-million-member NAR knows something the others don't or it is caught up in the fantasy that is part and parcel to the Disneyland experience here remains to be seen. But whatever the reason, it says price appreciation will return to the moribund housing market in 2012.
Speaking across the street from Disneyland, the self-proclaimed “Happiest Place on Earth,” at NAR's annual convention, chief economist Lawrence Yun said signs are developing that signal a “recovery occurring next year and continuing into 2014.”
It won't be a great, robust expansion but rather a moderate, respectable recovery, Yun said at a press briefing.
And spurred by a combination of population growth, a gradually improving employment picture and people anxious to leave their parents' basement and finally move out on their own, price appreciation should once again return to the market next year, the economist ventured.
Prices won't rise by much, he predicted—only 2% in 2012, 3% in 2013 and 4% in 2014. That's not terrific for people who bought at the peak of the boom, many of whom have seen the value of their properties drop by a third, according to some estimates, Yun admitted. “It will be quite a long time for those people to see a full recovery,” he told the small group of reporters covering the conference. “But it's good for new buyers.”
NAR, which calls itself “The Voice for Real Estate,” is betting that the tight credit conditions that have been holding back buyers will ease enough next year to allow at least some to take advantage of the best housing affordability conditions in years.
Based on the relationship of home prices, mortgage rates and family income, housing affordability hasn't been this favorable since 1970, Yun said. And it should be almost as good again in 2012, when it will be the “second best year on record,” second only to 2011.
“Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities,” he told reporters. “If we could maintain sound and reasonable mortgage underwriting standards, the market would be able to avoid a future big boom and bust cycle.”
In a separate briefing, Moe Veissi, the Miami land broker who will lead the politically powerful NAR for the next 12 months, said “head-butting” is already taking place in some local markets as buyers bid against each other for the same properties.
“People are starting to understand that the market isn't going to wait on them,” said Veissi, who noted that realty professionals are eternal optimists. “They realize that if you can get what you want for a decent price, it's a gift right now.”
For the moment, though, lending rules remain stringent, and house prices have yet to show signs of a definitive stabilization pattern. But the NAR's top economist said that once prices turn positive on a sustained basis, sagging consumer confidence will rise and the broader economy will start to improve.
Specifically, Yun is projecting that economic growth will rise from a subpar 1.8% this year to 2.2% in 2012. He also sees job growth bumping up from 1.7 million in 2011 to 2.2 million next year, bringing with it a decline in the unemployment rate to 8.7% in next year's second half.
The economist said the unsold inventory, which reached a peak of 4.5 million units in 2008, has dropped to 3.2 million and will continue to fall as the market begins to pick up steam. “Once inventory starts to go down, it continues because the momentum is so great,” he said.
Even a steady stream of distress sales isn't likely to put a damper on the market, Yun said during the press briefing. “Foreclosures are still coming, but demand also is ramping up.”
Foreclosures and short sales currently account for a third of all existing home sales, and the economist expects that percentage to be the same next year and the year after. Distress sales “will be with us for the next two years,” he said. “But buyers will soak up the excess houses and inventories will decline steadily.”
At the same time, though, Yun said the move-up market has yet to materialize. The “chain reaction” in which sellers become buyers as they move up the housing ladder “requires time” to return to normal, he said, “but we expect to see a steady chipping away” at the ratio of repeat buyers to first-timers.
Still, the NAR is forecasting that when all is said and done, existing home sales will be up 1% this year, reaching a total of 4.96 million. And Yun said sales should advance 4% to 5% more next year. Within two or three years, 5.7 to 5.8 million houses should be trading hands annually, he predicted.
The economist also reported that the group's revision to its existing home sales figures for the last decade should be finished shortly.
Because of “data drift,” NAR is in the process of reviewing the methodology it uses to calculate key benchmark statistics. While there should be no change in median prices, there will be downward revisions to sales volumes and unsold inventories dating back to 2001, and they will be substantial, with the greatest changes coming in the most recent years, Yun said.
While the changes won't mean anything to consumers, he said, the industry is about to find out that “sales activity has been far worse than previously thought.”
