It's a good bet the economic picture will remain highly uncertain as we head into 2009. Yet there's good reason to believe the housing market has turned the corner. Housing in some of the country's hottest markets during the boom- California, Florida and Nevada, among others- is once again starting to experience gains in home sales. The reason increased affordability.
Existing single-family home prices have come down an average 20 percent to 30 percent in these hard hit markets in the 12 months preceding September 2008. The price moderation has provided a compelling incentive to buy for households who've been sitting on the fence for the last two years.
The federal government has also helped with its long-sought increase in the conforming and FHA loan limits and the enactment of the $7,500 first-time homebuyers tax credit. Even if the economy stays in the doldrums, it's likely that existing-home sales will remain on the upward trajectory. New-home sales will continue to struggle because of the inventory overhang. During the 200-2003 downturn, the economy shed some 2 million jobs, yet existing-home sales rose from 5.2 million to 6.2 million units. The fact is, home sales can improve even in a recession. I would expect that 93 percent of the workforce will retain their jobs. To assure the housing continues its return to stable growth, NAR will be aggressively pushing to strengthen federal homebuying incentives. Home sales have historically have been the powerhouse for pushing our economy back into growth mode after a downturn. Given signs that improving affordability conditions are starting to drive home sale gains, the signs are good that home sales will spur the next economic recovery.
SALES STILL UP Existing single-family home sales were up in September and buyers took advantage of low prices. The EHS sale pace was 5.18 million units, up 5.5 percent from 4.91 million in August. NAR's forward-looking pending homes sales index dipped to 89.2 from 93.5 in August, but was 1.4 percentage points higher than the 8738 index in September 2007
IMPROVEMENT SEEN FOR SPRING Practitioners' expectations for sales activity over the next six months is up at the prospect of a solid Spring shopping season next year. Confidence in current seller and buyer traffic remains down, but federal efforts to shore up the economy haven't kicked in yet.
Lawrence Yun is Chief economist of the National Association of Realtors
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