Oxstones Investment Club™By Amy Hoak, MarketWatch
This update is to clarify that home-sales figures refer to existing-home sales.
NEW ORLEANS (MarketWatch) — Nationwide, homeowners can expect little, if any, increase in home values in 2011, the National Association of Realtors said in a forecast released Friday at the group’s annual conference in New Orleans.
And it will take another two years to clear the foreclosures and short sales on the market, said Lawrence Yun, the group’s chief economist, at a news conference.
NAR forecasts that home values nationwide will increase just 0.7% in 2011, not a “measurable meaningful change,” Yun said. In 2010, home prices will rise 0.1%, compared with 2009, according to NAR.
Still, five years from now, when home values have recovered and mortgage interest rates likely are higher, “many people will look back to 2010 and say ‘I should have bought a home back then,’” Yun said.
Clearly, not many Americans are of that thinking today.
Annual existing-home sales are expected to reach 4.8 million this year, a 7% drop from 5.16 million in 2009, Yun said. Last year, consumers had the added incentive of a home-buyer tax credit that enticed them to make a purchase; the credit, however, was available only for the first half of 2010. Read more on pending home sales fall 1.8% in September.
Yun predicts existing-home sales will rise to 5.1 million in 2011, assuming that job creation continues at a level that supports increased home buying. Read more on U.S. economy adds 151,000 jobs in October.
The pace of home sales this winter should help better predict the strength of the spring home-selling season next year, Yun said. By the winter, there will be less impact on sales due to the home-buyer tax credit. The credit caused people to make their purchases earlier than they otherwise would have; buyers in the market six months after its expiration, however, are more likely to be those who weren’t contemplating buying a home and getting the credit, he said.
Confidence matters
Despite some beliefs that prices have stabilized, consumer confidence continues to be a problem in selling homes, he said.
“Consumers are saying things are rotten in the country,” Yun said during a presentation to NAR members on Friday. Many people still believe that prices are falling, and even as jobs are created “the question is whether consumers will have confidence,” he said, and aren’t “fearful that there is no bubble to burst anymore.”
Consumers typically have increased confidence after elections, he said. And the gridlock that could hit Washington now that Republicans gained the majority in the U.S. House of Representatives may signal to business that further aggressive policy changes aren’t likely, he said.
The worst scenario for the real-estate market, he said, would be if the economy were to experience deflation, and those who might buy a home continue waiting, thinking “why buy now, I’ll buy one year from now,” he said.
Mortgage interest rates have likely hit bottom already, Yun said; he forecasts the 30-year fixed-rate mortgage will average 4.9% by the end of next year.
Homeownership shift
At the conference, real-estate agents are attending sessions designed to help them close sales, but there’s also attention on how to help buyers make responsible decisions in their home buying. NAR worked with the U.S. Department of Housing and Urban Development to produce a series of videos to help consumers during the home-buying process.
Thomas Hoenig, president of the Kansas City Federal Reserve Bank, said to NAR members that the country needs to rethink its past affinity for homeownership, and acknowledge that it isn’t for everyone.
Stricter underwriting standards and down payment requirements make sense, he said, and the country needs to “change the goal from everyone [owning a home] to insuring that there is shelter, that there is rental property that is affordable,” he said. It’s an important first step to creating a stable housing market in the long term, he said.
Amy Hoak is a MarketWatch reporter based in Chicago.
Source: marketwatch.com
Tags: 2011, home values, NAR forecasts