Overall Decline in Sales Contract Signings Suggests We Are Not Out of Woods, Says NAR
- Jul 15, 2008
By Anuradha Kher, Online News EditorWashington, D.C.–Modest near-term movement is expected in existing-home sales including multifamily, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of Realtors.The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5.“The concerns of multifamily buyers are consistent with those of overall concerns in the market,” Paul Bishop, managing director of research at NAR, tells MHN. “Buyers are concerned whether or not their house will be able to sell for a good price. Also, financing for multifamily is very hard.”Lawrence Yun, NAR chief economist, says some pullback after a sharp increase in the prior month was expected. “The overall decline in contract signings suggests we are not out of the woods by any means.”The PHSI in the West slipped 1.3 percent to 97.5 in May but is 2.0 percent higher than May 2007. In the Northeast, the index declined 2.9 percent to 77.0 in May and is 16.4 percent below a year ago. The index in the Midwest fell 6.0 percent to 78.6 and is 13.8 percent below May 2007. In the South, the index dropped 7.1 percent in May to 84.5 and is 22.1 percent below a year ago. Yun said location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans. NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the current market offers immediate benefits and long-term value for many buyers. “Home buyers are getting a great deal right now,” he said. “Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009.” Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5.0 percent next year to 5.58 million. “The speed at which home prices have declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun says. Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9.0 percent in 2009 to 879,000. The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.