After two years of strong increases in existing home sales, the usually upbeat National Association of Realtors is projecting that sales will be relatively flat in 2014.
Higher interest rates—up to 5.4% by the end of the year—will take some affordability out of the market,
But higher rates will be offset by "very respectable job creation" and a loosening of mortgage underwriting standards, Yun told reporters. So there will be no drop off is sales, which will reach 5.2 million units this year, in 2014. But there will be no net gain, either.
Even with stagnating sales, though, the economist expects existing home prices to rise next year by about 6% to a median of $207,800. Still, that's only half the nearly 12% that prices rose in 2012 and again in 2013.
The rise in prices will be fueled by a continued lack of new home inventory, as small builders remain largely on the sidelines.
"The way to release home price pressure is for more inventory to come to the market," says Yun. "Homebuilders have to really step up. It's mind-boggling to me that starts did not continue their upward trend."
The "only builders who are actively building" are the large public companies which can access credit directly from Wall Street, Yun says. "We need small builders," which have difficulty obtaining construction loans, "to get back into the market."
Unlike the other major trade groups, NAR does not make any projections concerning mortgage originations. But Yun believes lenders will be loosening their purse strings somewhat in the coming months as the refinance business continues to wane.
With the refi business "collapsing," he told reporters, lenders have to "be more focused" on the purchase money lending "than they have been in the last couple of years."
The economist also says mortgage rates will rise by the end of next year in anticipation of increases in the Fed funds rates in 2015.
NAR's new president, Steve Brown, used his first stand at the podium to call on lawmakers in Washington to get off their duffs to deal with key housing issues.
"Critical housing issues must be addressed before a full recovery can occur," the Dayton, Ohio, broker says. "The time is now for policymakers to make housing a priority and to tackle the difficult decisions about the future of the housing sector. Otherwise, uncertainty will continue to plague the market."
Until Congress figures out whether there will be tax reform, and takes the time to deal directly with the future mortgage finance, Brown said, "a full recovery will remain exceedingly difficult."
NAR believes that only a mortgage system with a government guarantee will ensure that creditworthy borrowers will have access to the funding they need during all market conditions. "Consumers must have access to affordable mortgage products so they can attain the American dream and begin to build wealth," its new leader says.
NAR also wants Congress to "stand up" for ownership and the value it brings by preserving favorable property and tax policies. "Congress should do no harm to homeowners or housing markets," Brown says.
Lew Sichelman is an independent journalist who has been covering the housing and mortgage markets for more than 40 years.
