Positive underlying economic factors are helping relieve a pent-up housing demand, National Association of REALTORS® (NAR) chief economist Lawrence Yun informed REALTORS® at a forum during the REALTORS® Midyear Legislative Meetings & Trade Expo last week in Washington, D.C.
"Historically high housing affordability conditions, ongoing job creation, a solid stock market recovery, rising rents, a larger pool of qualified renters, a pent-up demand and improving confidence are drawing buyers to the market," said Yun. "We just finished the strongest first quarter for home sales in five years, pending contracts are pointing to a strong second quarter, and the favorable conditions are helping the economy recover from an unusual slowdown in household formation in recent years with more young people now leaving their parents' homes."
Despite a minor gain in total home sales last year, owner-occupied sales fell. "Tight mortgage credit is holding back a stronger recovery. Banks are hoarding cash, possibly from regulatory uncertainties and lawsuits," said Yun.
Suzanne Yost, president of the Silicon Valley Association of REALTORS®, attended the NAR meetings with other members of the local trade association. "The Silicon Valley region is fortunate to have experienced a housing recovery sooner than other parts of the state. We are happy that more places in the nation are beginning to see signs of a recovery, as well," said Yost. "Tight lending practices continue to stall a full recovery. As the economy continues to improve, we hope lenders will make loans more accessible to creditworthy borrowers."
Yun forecasts 4.6 to 4.7 million existing-home sales in 2012, up strongly from 4.26 million last year, and additional improvement in 2013 with sales rising to the range of 4.7 to 4.8 million.
Mortgage interest rates are projected to rise gradually and then average 4.9 percent in 2013 - still historically favorable. "The pressure of rising rents on consumer inflation could force the Federal Reserve to raise interest rates in 2014, which might be good for home sales. Refinancing would fall and bank staff would be able to focus more on mortgage origination for home purchases," Yun said.
Inflation currently remains under control with the Consumer Price Index rising about 2.4 percent this year and 2.8 percent in 2013. Additionally, Yun expects the Gross Domestic Product to grow 2.4 percent this year and 3.1 percent in 2013, adding 2.2 million jobs this year and 2.5 million in 2013.
Yun said the median existing-home price is likely to improve modestly this year, rising just over 1 percent, with a gain of about 3 percent forecast for 2013. His forecast assumes no adverse Washington policy or tax changes affecting homeownership. He adds there would be significant economic fallout if there is no new budget compromise by the end of the 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.
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