4 Key Areas for Real Estate in the Spring

BOSTON ( MainStreet) -- The housing market's key spring selling season gets under way this month, and the National Association of Realtors expects the number of homes changing hands to actually rise this time around after years of flat or declining sales.

"This is the first year where we may see meaningful recovery signs in housing," says the NAR's chief economist, Lawrence Yun, who recently boosted his forecast for second-quarter existing-home sales to a seasonally adjusted 4.5 million units. That's up 7.7% from a year earlier.
There's good news for the housing market in spring, especially in places such as long-suffering Miami, where demand may well start bumping up.

Yun also expects median U.S. sales prices to rise 1% from last year's levels to hit $171,000 this spring.

"A lot of factors are moving in the right direction," he says. "Mortgage rates are at historic lows, rising rents are squeezing tenants, the stock market has robustly bounced back and the job market is beginning to come around."

The economist adds that sub-4% mortgage rates, the lowest backlog of unsold homes in seven years and prices that have dropped back to 2003 levels should also buoy the market.

"I think we can get price stability or a modest price pickup," Yun says of the spring.

Of course, plenty of headwinds remain for housing.

For instance, Yun says today's low interest rates aren't helping the sector as much as they should because tight lending standards prompted by the subprime mortgage crisis mean fewer consumers qualify for loans.

He also says many would-be buyers are reluctant to buy after years of plummeting home prices.

"Bad consumer sentiment is definitely holding things back," Yun says. "People are looking for evidence that markets have bottomed out -- but the only thing that will show that is prices consistently going up."

Still, the economist expects rising home sales this spring in many U.S locales, particularly cities or states that have good job growth or tumbled the most during the housing bust. Areas Yun thinks will do well include:
  • North Dakota. An oil-and-gas boom here is creating low unemployment and tight housing supplies, setting the stage for what Yun expects could be double-digit home-price gains this year.
  • Miami. Investors snapped up cut-rate housing last year in this long-suffering housing market, eating up a lot of unsold inventory. "Now demand should begin to bump prices up," Yun says.
  • Rocky Mountain states. The economist expects home sales to stabilize in Idaho, Utah and possibly Colorado -- three states that entered the housing bust relatively late and are therefore bottoming out later than other U.S. locales.
  • Detroit and Cleveland. Home prices have fallen so much in these two Rust Belt cities that they'd have to rebound a bit just to get back to normal, Yun says. He notes that Detroit was the only major U.S. city to see housing values rise year-over-year in the latest monthly S&P/Case-Shiller Home Price Index report.

Conversely, Yun expects a lackluster spring market elsewhere.

For example, election-year talk of shrinking the federal government's size could flatten out prices in Greater Washington, D.C. -- which avoided the worst of the U.S. housing bust because of public spending.

Yun predicts the D.C. market "won't feel much pain, but won't see much gain, either."

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