There's no index to track fear, but that could be the unspoken reason why the National Association of Realtors is expecting flat sales until the middle of the year.

After all, the trade organization doesn't expect the economy to grow in the first half of the year. Inflation is expected to be higher at 3.4 percent, and unemployment will rise to 5.4 percent.

Those aren't factors that put people in a buying mood, but all that could change by the second half of the year when economic stimulus packages begin to take effect.

The February Pending Home Sales Index which tracks purchase contracts slipped nearly two percent (1.9 percent) to 84.6, a 21.4 percent drop from February 2007's index of 107.6. Lower selling prices of approximately 1.4 percent will result in a new median home price of about $215,800.

But lower prices mean rising affordability, and that coupled with liquidity improvements in the jumbo loan market means sales could recover, particularly in high-cost areas like California.

The reason? Pent-up demand. Inflation-adjusted disposable personal income is likely to grow 1.2 percent this year, so consumers have more money, they just aren't spending it. They want to know how much gas, milk and bread are going to cost before they sign a purchase contract.

As homebuyers have sat on the sidelines, they have watched near record low interest rates come and go. They've seen homes continue to sell, with nearly one-third of homes going to investors and second-home buyers. And homeowners have dropped prices -- not the 20 percent that some pundits are seeking, but they've dropped enough to turn the clock back to the boom days of 2004. Meanwhile, mortgage interest rates are still attractive at under 6 percent for fixed-rate, good credit loans.

“Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” says Lawrence Yun, chief economist for the NAR.

And that's the big IF. Inflation could squash the housing recovery, at least for the short term. Buyers with cash, however, will always be able to pick up a good deal.

Published: April 9, 2008

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.