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REALTORS® Predict Housing Market Rebound in Second Half of Year

Source: GMAR Realtors
May 2008

Home sales and prices throughout most of the country, including the Milwaukee market are poised for improvement in the second half of 2008, according to Lawrence Yun, chief economist for the National Association of Realtors (NAR).

Speaking at the NAR Midyear Legislative Meetings & Trade Expo on Thursday, Yun said "middle-America" cities that performed evenly over the past few years, such as Milwaukee, Cincinnati and Kansas City, Mo., are likely to experience home price gains in the 20 to 30 percent range over the next five years. Markets such as Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.

Yun blamed most of the softening of the housing market over the last year on the "subprime mess," where consumers with blemished credit records received loans they could not afford when the interest rates reset to higher levels. "In fact, if you look at where home prices fell the most, it's the markets where subprime loans were prevalent," Yun said.

Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with the highest percentages of subprime lending and where the markets suffered the biggest downturns, he said.

"It's important to keep things in context," Yun said. "While much of the media is focusing on the fact that the rate of foreclosures doubled this year from historic averages, the foreclosure rate has gone from 1 percent of all homeowners with mortgages to 2 percent. Foreclosures are being driven principally by subprime loans."

Now that the subprime market has dried up, and loans insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac are making a comeback, the housing markets will strengthen and prices are likely to begin a steady uptick in the coming months, Yun said.

Yun urged the Congress and White House to enact NAR-supported legislation to modernize FHA programs, reform regulation of the government-sponsored enterprises (Fannie Mae and Freddie Mac), establish a first-time home buyer tax credit and make the temporary increases to the conforming loan limits established by the Economic Stimulus Act of 2008 permanent.

"These measures would quickly stabilize the housing markets and get fence-sitters into the market to buy homes," Yun said. "There are many reasons for people to get into the housing market today, and very few reasons not to. With the plentiful supply of homes for sale at affordable prices, interest rates approaching 40-year lows, and the strong track record of housing as a good long-term investment, conditions are ripe for buyers," he added. "Those are the facts, plain and simple."