NEW ORLEANS—Following two straight months of improvement, pending home sales dipped 1.8% nationally in September, the National Association of Realtors reported at it’s annual convention here earlier this month.
Nevertheless, the group’s chief economist, Lawrence Yun, believes a recovery, albeit a slow one, is at hand.
Yun said the slide in pending sales was largely a result of the foreclosure moratoriums put in place by lenders while they assess the extent of the damage caused by inaccurate foreclosure filings.
He also said the forward-looking index, which reflects contracts, not closings, still shows the effects of the end of the homebuyer tax credits.
“It will take six months before the market normalizes,” Yun said. “If sales match up with past normal winters, it will mean the recovery will be setting up nicely under its own power.”
Overall, the National Association of Realtors estimates that 4.8 million existing houses will change hands this year and 5.1 million will have new owners next year. By contrast, 5.2 million houses were resold in 2009. “We are entering a virtuous cycle,” Yun said.
Yun expects a sharp drop-off in new home sales, from 376,000 last year to 313,000 this year.
That’s a 16.7% slide, and it’s on top of the 22.6% plunge from the 518,000 new home sales that took place in 2009.
But in 2011, the NAR economist is looking for new home sales to bounce back to 388,000, a gain of 23.7% from 2010.
Although consumer confidence is low, Yun told his members that buyers still are responding to favorable affordability conditions.
He pointed out that completed deals in the existing home space have been up for the past two months, including a 10% jump in September.
One aspect of the affordability equation is mortgage rates. And while they are hovering below 4.5% right now, the NAR economist projects they will rise throughout the next two years—to 5% in 2011 and nearly 6% in 2012.
“Mortgage rates have probably hit bottom,” he said. “Higher rates in the next couple of years could impact and potentially reduce the number of potential buyers entering the housing market.”
Jobs are even more important than mortgage rates. After all, people who aren’t working can’t buy houses, even with rates at 2% or 3%.
And on that front, the NAR economist is reasonably optimistic.
He expects 1.5 million new jobs to be added next year, on top of the 1 million created this year.
But, he added, “If the job market stalls, that’s when we run into trouble.”
