Chicago, Illinois – November 28, 2008 – Housing market conditions in the United States were the big topic at the recent annual convention of the National Association of REALTORS® (NAR), held in Orlando, Florida early November. While more than 19,000 REALTORS® attended the event, the numbers were down from the highs of over 30,000 at NAR conventions in recent years.

With a (US) $2-trillion loss in housing valuation wealth from the market peak, consumers in the U.S. are conserving cash and recovery has been slow, said Lawrence Yun, NAR’s chief economist. “We may have already hit bottom as far back as 10 months ago,” Yun said. “Recovery depends on a variety of conditions, from mortgage rates to employment rates. Housing sales are rising significantly in some U.S. markets.”

Unemployment rates in the U.S. have been rising for nine straight months, reaching 6.1 per cent by early November, and anticipated to rise to seven per cent in 2009. So much depends on consumer perception, Yun said. Despite a recession in the 1970s, there was little change in home sales. In the 1980s, steep mortgage rates caused a deep decline in housing sales, while the early 1990s recession saw only a moderate decline in sales. A recession very early in the new millennium had no negative impact on sales; in fact, housing sales increased.

Since 2005, prices in the U.S. have been edging downward. On the positive side, this has made housing more affordable. It’s also caused the public to ask “Should I wait?” to buy or sell. “Low prices are not a concern. It’s falling prices that cause consumers to wait,” Yun said. “There’s been a three-year cycle of home sales declining,” he said. “But current data shows stabilization beginning to occur, with a slight increase in sales. We don’t yet know if this will continue. Inventory is still very high, with a 10-month supply on the market. Foreclosures are still rising, caused by the sub-prime default rate; nearly five per cent of all mortgages each quarter are failing because of the sub-prime issue.” Yun said the U.S. government has implemented three measures to help stabilize the housing market.

First-time homebuyers receive a tax credit that must be paid back over 15 years. (Yun says there has not been a great deal of take-up for this, but expects that to improve with government plans to relax or remove the payback feature.)
Fannie Mae and Freddie Mac loan limits have increased to $729,000.
An interest rate buy-down means fixed low interest rates for qualifying homebuyers with government subsidizing the rates. This is expected to have a significant impact on the housing sector.

Nationally, existing homes sales in the U.S. are at 1998 levels. Decreasing inventory is expected to help stabilize prices. “But what about the 12-million ‘underwater’ homeowners?” Yun asked about sub-prime mortgage holders. “We will likely see some rising foreclosures in 2009. The rest will ‘bunker down’ and not move up in the market this coming year.” Whether the U.S. market experiences a sharp or modest rebound depends on several factors, including the government’s new housing stimulus bill, Yun said. “If people are financially ready, they may want to take advantage of the tax break while it’s available and buy a home in 2009. Mortgage rates are off rock-bottom points, but are still historically favourable,” he said. “Though there’s no guarantee, buying a home has always been a path to long-term wealth.”