America's economic rebound depends on a real estate recovery, but many are asking –"what's it going to take to get it all going?"
The Silicon Valley Association of REALTORS® points out that housing always leads the economy in recoveries, and this one will be no different. In fact, already there are signs that housing is perking up.
"The most important factor driving home sales is affordability," according to Leannah Hunt, president of the Silicon Valley Association of REALTORS®. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved.
"While it's true that unemployment is rising, it's important to remember that 93 percent of working households have jobs, compared with 95 percent during good economic times. Those people who are working, respond to incentives and attractive affordability conditions," Hunt said.
Measures like the new first-time homebuyer tax credit and the increased number of mortgage loans qualifying to be purchased by Fannie Mae, Freddie Mac and the Federal Housing Administration are helping to bring homebuyers into the marketplace, Hunt said.
An early indication that buyers are responding to incentives was the solid jump in pending home sales in August, to the highest level in more than a year. Although the Pending Home Sales Index based on contracts signed in October slipped 0.7 percent to 88.9 from 89.5 in September, and is one percent below October 2007 when it was 89.8, National Association of REALTORS® chief economist Lawrence Yun said a review of the past year is instructive.
"Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range," he said. "We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market."
Nationwide, existing-home sales likely will break out from a seasonally adjusted annual sales rate of 4.8 million to 5.2 million by the end of this year, according to NAR. By 2009, existing-home sales likely will total 5.4 million, up from about five million in 2008.
NAR's economists are not expecting a prolonged and deep recession. "Previous housing recoveries have shown that rising sales will thin out the housing inventory and begin stabilizing home prices," Hunt said. "The credit markets will loosen up once home prices have begun to recover."
Fortunately, President-elect Barack Obama and his team recognize the need to get the housing market moving, Hunt said. "The two housing stimulus bills this year (which include the homebuyer tax credit and higher loan limits), as well as the $700 billion U.S. Treasury plan and the Federal Reserve's actions are all designed to assure a steady mortgage flow and help revive the housing sector," she added.
Hunt said NAR is also urging Congress to make the $7,500 first-time home buyer tax credit available to all buyers and eliminate the repayment requirement. REALTORS® also want Congress to make the 2008 Fannie Mae and Freddie Mac loan limits permanent. The 2008 limit is $729,750 for Santa Clara County and San Mateo County, and most San Francisco Bay Area counties.
Hunt advises home buyers and sellers to take a good look at the opportunities that exist in today's market. "For qualified buyers, this could be just the time to take advantage of the lower interest rates, affordable prices and incentives like the tax credit," she said.
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 email or call the SILVAR office at (408) 200-0100.