Sales activity in the housing market will continue to be soft in the months ahead but should gradually improve during the second half of 2008, especially if loan limits are increased, NAR reports in its latest forecast. Sales of existing homes are projected to be at a pace of 4.9 million in the first half of the year and rise to 5.8 million in the second half before leveling off to 5.60 million for all of 2009. Existing-home sales totaled 5.65 million in 2007. Existing-home prices are expected to fall 1.2 percent in 2008 to $216,300 and rise 3.2 percent to $223,200 in 2009. National median existing-home prices fell 1.4 percent in 2007.
NAR also projects new-home sales to decline 17.7 percent in 2008 to 637,000 and then climb 7.6 percent to 685,000 in 2009. The median price of new homes is expected to fall 4.3 percent to $236,300 in 2008 and then increase 5.0 percent in 2009.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in December, slipped 1.5 percent compared to the prior month and was 24.2 percent below December 2006. The index rose in the Midwest by 3.4 percent but was 17.3 percent below a year ago. But the index fell in the other three regions. In the South, it fell 3.0 percent in December (27.0 percent below a year ago); in the Northeast, it slipped 1.7 percent (26.0 percent below December 2006); and in the West, it fell 3.1 percent (24.1 percent below a year ago).
Lawrence Yun, NAR’s chief economist, says higher loan limits for conventional mortgages could have a positive impact on sales. “If higher limits are enacted very quickly, we’ll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas — that, in turn, would help to stimulate overall economic activity.”