Economists at the National Association of Realtors are forecasting an almost 7% increase in existing home sales in 2012, following a 2% improvement last year.
The Realty trade group also expects home values to stabilize as the economy grows at a slightly stronger rate in 2012 and companies increase hiring.
However, tight credit conditions and contract failures continue to be major concerns. “Our hope is lending conditions will gradually improve with sustained increases in closed existing-home sales," NAR chief economist Lawrence Yun said Wednesday morning.
(As Yun spoke news broke that Citigroup had issued a memo telling its correspondent mortgage sellers that going forward it would only buy low-risk loans. See related story on the NMN website.)
Yun noted that one-third of Realtors reported contract failures in the past few months where a home buyer could not complete a purchase due to mortgage, appraisal or other issues.
Along with the release of its 2012 forecast, NAR reported that its leading indicator of future home sales fell 3.5% in December. The trade group's pending home sales index is based on signed contracts, which usually translate into sales a month or two down the road.
The PSI surged in October and November to 100.1 before falling to 96.6 in December.
Even with the modest decline in December, "the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,” Yun said.
Year-over-year, its PSI is up 5.6%.
