As Inventories Decline
Home prices are expected to recover in 2008 with existing-home salespicking up late this year and new-home sales rising early next year,according to the latest forecast by the National Association of Realtors®.
Lawrence Yun, NAR senior economist, said a good buyers’ market hasevolved. "Buyers now have an overwhelming advantage given the wideselection of homes available in many markets," he said. "But with profitmargins coming under pressure, homebuilders will limit new constructionwell into 2008. This should help the overall inventory level to movesteadily into a more balanced state."
Existing-home sales are expected to total 6.11 million this year and 6.37million in 2008, down from 6.48 million last year. New-home sales areprojected at 865,000 in 2007 and 878,000 next year, compared with 1.05million in 2006. Housing starts, including multifamily units, areforecast at 1.43 million units this year and 1.44 million in 2008, downfrom 1.80 million last year.
Existing-home prices are likely to rise 1.8 percent to a median of$222,700 in 2008 after a 1.4 percent decline this year to $218,800. Themedian new-home price should rise 2.2 percent to $245,400 next yearfollowing a 2.6 percent drop in 2007 to $240,100.
"Markets that sharply reduce new construction in 2007 will generallyexperience respectable price increases in 2008," Yun said. "Localconditions vary considerably, but with historically low mortgage interestrates this summer and sustained job gains, it could be a good time forfirst-time buyers with a long-term view to test the housing waters."
The 30-year fixed-rate mortgage is estimated to average 6.7 percent duringthe second half of this year, and fluctuate around 6.6 percent in 2008.
Growth in the U.S. gross domestic product (GDP) will probably be 2.0percent in 2007, compared with a 3.3 percent growth rate last year; GDP isforecast to grow 2.8 percent in 2008.
The unemployment rate is likely to average 4.6 percent in 2007, unchangedfrom last year. Inflation, as measured by the Consumer Price Index, isprojected at 2.6 percent in 2007, down from 3.2 percent last year. Inflation-adjusted disposable personal income should rise 3.0 percent thisyear, up from a 2.6 percent gain in 2006.
The National Association of Realtors®, "The Voice for Real Estate," isAmerica’s largest trade association, representing more than 1.3 millionmembers involved in all aspects of the residential and commercial realestate industries.