In a forecast released today, the National Association of Realtors lowered its expectations for existing-home sales to 5.02 million in 2008 and new-home sales to 487,000 as unemployment concerns grow.
These figures are down from expectations one month ago of 5.04 million resale homes and 503,000 new-home sales in 2008. NAR expects existing-home sales to rise to 5.32 million next year and 5.62 million in 2010, while it sees sales of new homes falling to 413,000 next year and growing to 520,000 in 2010.
Lawrence Yun, NAR chief economist, projects growth in the U.S. gross domestic product (GDP) to contract in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as home sales recover. "Right now we’re in a recession and unemployment will increase through 2009," he said. "Consumer spending has halted and businesses are very cautious of expanding. It is unclear by how much the global economic slowdown will dampen U.S. exports, which had been rising strongly."
"The depth of the recession depends entirely on housing — with sufficient housing stimulus, the recession will be shallow. If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation’s output and income in a severe recession."
Housing starts, including multifamily units, will probably total 936,000 units in 2008 and 781,000 next year, then increase to 886,000 in 2010, according to NAR — its forecast released last month predicted 973,000 starts in ’08 and 843,000 in ’09.
For all of 2008, home prices will have fallen by more than 20 percent in Las Vegas, Phoenix, and many California and Florida markets, while many markets in middle America will experience little change, according to the forecast. Wide variations in home-price movements will continue in 2009, with Houston and Denver likely to see respectable price gains while most other markets experience no notable change.
The 30-year fixed-rate mortgage should average 6.2 percent in the fourth quarter, rise gradually to 6.5 percent during the second half of 2009 and then average 6.7 percent in 2010. NAR’s housing affordability index is averaging 19 percentage points higher this year than in 2007, but is estimated to ease modestly in 2009.
The unemployment rate is expected to be 6.4 percent in the fourth quarter and then average 7 percent in 2009. "We’ve lost jobs throughout the year, and we could see jobs continue to decline for another six months — unemployment may top out around 7 percent," Yun said.
Inflation, as measured by the Consumer Price Index, is seen at 4.4 percent for 2008, easing to 2.2 percent next year. Inflation-adjusted disposable personal income is projected to grow 1.4 percent this year and 1.6 percent in 2009.
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