The truth about the current housing market remains more complicated than a 30 second evening news soundbite can convey. While there are some weak spots created by the subprime mess, the overall picture is far from gloomy. Consider some of the facts presented recently by the NAR, the National Association of Realtors.
The National Association of Realtors reports that widening credit availability will help home sales rebound. Foreclosures have peaked so housing appears poised to come back.
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Consumers are becoming more savvy to the long term costs of a mortgage and as such are returning to traditional loans, which will help the recovery. Lawrence Yun, NAR senior economist, says “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,”This past week the Mortgage Bankers Association reported mortgage loan activity increasing 2.4 percent over the week before.Treasury Secretary Henry Paulson spearheaded the formation of a mortgage industry coalition composed of the top 10 mortgage lenders to help consumers with at risk loans. The consortium has about 60 percent market share and whatever form the help takes, such as restructuring, debt forgiveness, interest rate discounts—any little bit should help take the bite out of the current downturn.
Granted, the consortium of lenders is not doing this out of charity, by bolstering the real estate market they are protecting their existing portfolio of loans from massive depreciation. A sector wide decrease in housing prices would hurt all lenders, not just sub-primes. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year — a lot of people are, in fact, buying homes,” says Yun of the NAR. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”
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NAR forecasts: The Prize buy
- the 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and reach the 6.6 percent range in the second half 2008.
- growth in the
U.S. gross domestic product (GDP) is estimated at 2.0 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent in 2008.
- the unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006.
- the median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900.
- that existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800.
Economy wide inflationi is a concern, reports the NAR. Pokemon 4Ever dvd
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Currently the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year, says NAR. However, concerns about inflation have been hounding the US economy for at least the last 15 years, and have never materialized. Many economists were taught that inflation was a huge risk, but with increasing globalization, specialization and trade, inflation has not materialized, even in the face of record high oil prices.
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The year 2007 will be the fifth highest ever for existing-home sales if the trend continues to total 5.78 million in 2007 and then rise to 6.12 million in 2008, which is still down from 6.48 million in 2006. Valiant buy
The bottom line is that sound home buying decisions with traditionally structured loans will continue to be the best way for Americans to save and invest. Peaks and valleys come and go, and some people got burned in this last boom, but most Americans who bought a place to live, rather than a lottery ticket mortgage, will earn a substantial return on their investment while continuing to benefit from the interest rate write off on their taxes.
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