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REALTOR®: NAR Sees Gradual Recovery Later In the Year

Wednesday, March 12, 2008

The National Association of REALTORS® expects the volume of existing-home sales to hold steady through spring, and as the mortgage situation improves in high-cost areas, anticipates a gradual recovery during the second half of the year.

NAR expects the higher conforming loan limits will have a positive impact on the housing market, especially in high cost areas. The Department of Housing and Urban Development has officially raised the new conforming limits for loans guaranteed by the Federal Housing Administration in Santa Clara, San Mateo and 12 other high-cost California counties to a maximum of $729,750.  There is also a temporary increase in the cap on mortgages that Fannie Mae and Freddie Mac can buy or guarantee from $417,000 to $729,750.

NAR Chief Economist Lawrence Yun said many buyers have been waiting for higher mortgage loan limits, which were recently approved. "The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions," he said.  "Therefore, a notable rise in home sales can be anticipated in the second half of the year."

Silicon Valley Association of REALTORS® President Leannah Hunt said the economic stimulus package will help, although it will not cure all housing market problems.

"The passage of the stimulus package with the higher conforming loan limits presents a very good opportunity for a lot of people to do some refinancing and get over a financial hurdle, but undoubtedly, there will be further foreclosures with the resetting of rates," said Hunt. "People just didn't prepare for the increases in these adjustable rates."

In the Silicon Valley area, 2007 was a more balanced market with buyers and sellers, Hunt said. "The housing market did well throughout our region. The northern part had minimal inventory all year long, but it stayed healthy, with a number of homes receiving multiple offers. Some neighborhoods in the southern portion of our region had more inventory and a more balanced market."

Hunt expects the first quarter of 2008 to continue on a positive note. "I expect we will continue to have a healthy market because our economy is strong in Silicon Valley, and interest rates are still favorable to buyers. Activity will be good, but it may start off sluggish in the first quarter until we build more inventory."

A longtime Realtor with Coldwell Banker in Palo Alto, Hunt said particularly in Palo Alto, homes priced right have been receiving multiple offers and days on market. In Palo Alto, days on market for single family homes stayed at 24 in 2006 and 2007, according to data from MLSListings Inc., SILVAR's Multiple Listing Service. In February 2008, days on market dropped to 15, from 35 during the same period in 2007.

"We're very blessed in this area because we only have a finite amount of housing, and our good schools continue to be a driving factor that attracts families to our region," said Hunt.

NAR reported the Pending Home Sales Index based on contracts signed in January held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.  "This additional sign of a stabilizing market is encouraging, and our members are telling us there's been a pickup in shopping activity." Yun said.  "Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers."

The PHSI in the West jumped 13 percent in January, but remains 12.7 percent below a year ago. In the Midwest, the index rose 0.6 percent, but is 13.3 percent lower than January 2007. The index in the Northeast declined 4.1 percent in January and is 28 percent below a year ago. In the South, the index fell 6.1 percent in January and is 23.8 percent below January 2007.

Yun said the median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.

The 30-year fixed-rate mortgage is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009. Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009. The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year.  Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009.  Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.


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, email , or phone (408) 200-0109.

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