Real Estate Articles

Home sales projected to rise gradually this year

The National Association of Realtors® (NAR) reports after bottoming in the fourth quarter of 2006, existing-home sales are expected to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer.

Annual totals for existing-home sales will be fairly comparable between 2006 and 2007, according to David Lereah, NAR’s chief economist.

“We have to keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,” Lereah said. “We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals. The good news is that the steady improvement in sales will support price appreciation moving forward.”

NAR reports that existing-home sales for 2006 are expected to come in at 6.50 million, the third highest on record, with a total of 6.42 million seen in 2007. New-home sales in 2006 should tally 1.06 million, the fourth highest on record, with 957,000 projected this year.

Silicon Valley Association of Realtors® (SILVAR) President Mark Burns, a Realtor with Coldwell Banker in Cupertino, is optimistic about home sales for the area because the economic climate in Santa Clara County is positive, with employment growth and interest rates still low, he noted.

As conditions stabilize, it’s a good time for both buyers and sellers, said Burns, but he also points out, especially in a normal market, buyers and sellers should base their decisions on needs.

“Do you need to buy a larger or smaller home? Do you need to sell and move to a retirement area? Do you need to buy a home closer to work? In a better school district? Near relatives and friends? Those are the questions you should ask yourself,” advised Burns.

He cautioned, “Housing decisions based on other factors like speculation lead to cyclical and dangerous price movements. If you are ready to move . . . go ahead, you’ll do fine,” especially in Silicon Valley, said Burns, which is “one of the best places in the world to live.”

Builders’ confidence appears to be climbing - another sign that the housing market is normalizing. Builder confidence rose two points in January, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI increased from an upwardly revised 33 in December to 35 in January, its highest level since July of 2006.

“Builders are responding to increased buyer interest at the end of 2006 and beginning of 2007,” said NAHB President David Pressly. “This bodes well for the upcoming spring buying season.”
 
NAHB Chief Economist David Seiders indicated the same factors that were evident at the end of 2006 continue to hold true in today’s housing market – improving affordability measures, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes.

“Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted,” said Seiders.
 
The recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-year, lower energy prices following what had been record highs, and solid growth in employment and household income, Seiders explained. Reductions in home prices and widespread sales incentives offered by builders also have helped resuscitate buyer demand.

The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers, Lereah said.

“With all the wild projections by academics, Wall Street analysts and others in the media, it appears that much of the housing sector is experiencing a soft landing,” Lereah said.  “Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you’re in it for the long haul, housing is a sound investment.”

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, e-mail , or phone (408) 200-0109.

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