The National Association of Realtors expects soft market conditions to continue across much of the country but there's also plenty of reason to be hopeful that homebuying will pick up again by mid-year if not sooner.
The latest pending sales index, based on contracts signed in December slipped 1.5 percent from November, and was 24.2 percent below December's pending sales in 2006.
That has NAR economist Lawrence Yun seeing a pattern of "skimming along the bottom of the cycle" where sales could ease further, but "modestly."
Why? Buying conditions have improved.
Mortgage interest rates have dropped to near record-low levels and held under six percent almost the entire month of January and into February, which should put pending sales for January back into positive territory.
Also, Federal Housing Administration (FHA) and the Fannie Mae and Freddie Mac (GSE) loan limits have been temporarily increased, which will allow hundreds of thousands of borrowers to get into conventional loans.
But Yun still raises the caution flag.
Household formation, the most critical number to impact housing units, was half what it should have been in 2007, which indicates pent-up demand for homebuying.
What's unknown, is how much longer renters, 40 percent of first-time homebuyers, will stay in their apartments, or how many grown children will remain in their parents' basements.
If mortgage interest rates remain below 6 percent as the NAR expects them to for the remainder of 2008, then home sales should improve by the second half of the year.
But a lot of that depends on lenders. If their reluctance to loan can be offset by higher conventional loan limits which takes the risk out of the equation for banks, then housing should improve.
Another X factor is what people will do with their economic stimulus checks. Will they pay down debt, save their money, or add it to their downpayment on a new home?
We'll know more soon. Watch Realty Times daily for real-time mortgage interest rates.
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