The National Association of Realtors announced yesterday that existing-home sales are projected to show a slight increase in 2008, though many measures still indicate that housing is likely to remain weak for some time.
Existing-home sales are likely to total 5.67 million this year, falling 12.5% from the 6.48 million total in 2006. But the NAR now projects that sales will rise to 5.70 million in 2008, a slightly more optimistic forecast than it gave in November.
Pending home sales are well off year-ago levels but are inching upward on a monthly basis, according to recently released data based on October numbers. The Pending Home Sales Index, a forward-looking indicator based on contracts, increased in October to 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but it remained 18.4% below the October 2006 index of 106.8.
"The broad trend over the coming year will be a gradual rise in existing-home sales," said NAR Chief Economist Lawrence Yun in a press statement.
But others were less optimistic.
"We are not out of the woods yet. You are going to have to see three or four months of a pickup in activity to know it is getting better," says Alan Rosenbaum, CEO-founder of New York-based GuardHill Financial Corp, a high-end mortgage brokerage, who adds, "I am surprised by these numbers [from the NAR] but this doesn't signal a rebound in real estate right now."
The PHSI in the Northeast jumped 16% in October to 80.6 but is 11.1% below a year ago. In the West, the index rose 8.4% to 87.3 but is 16.9% lower than October 2006. The index in the Midwest slipped 1.4% in October to 85.5 and is 11.7% below a year ago. In the South, the index dropped 7.8% in October to 91.6 and is 25.3% below October 2006.
The forecast on sales of new single-family homes shows continued declines in the double digits, although the pace of the decline is slowing. For 2008, the NAR predicts that new single-family home sales will fall 12.9% from 2007 numbers, which had fallen 24.3% from 2006 numbers.
Part of the reason for the decline in the new-home sales is that builders are slowing construction on new units. They would have started construction on 1.35 million homes in 2007 compared with 1.8 million in 2006, a 25% drop. However, that decline is itself brought about by the lag in the housing sector, as builders and others try to work off a big backlog in inventory of homes for sale.
"The residential housing market, except for perhaps apartments, will continue to decline for the next three to five years and then rebound to 2006 prices in about six or seven years," said Dennis Torres, a real estate investor and the director of real estate operations for Pepperdine University in Calfornia.
Still, some buyers are starting to gain confidence in home purchases due to several factors, say experts, including lower mortgage rates, increased backing from the Federal Housing Administration, strong job security and increased wages. In addition, the housing slump makes homes more affordable: The average American home costs $217,600, down from $219,600 two years ago, according to the NAR.