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NAR Puts Housing Market in Perspective: 2007 will be the Fifth Best Year on Record
LAS VEGAS, November 13, 2007 -
What a difference five years makes. That’s the point made by NAR economists and practitioners in today’s Economic Issues and Residential Real Estate Business Trends Forum at the National Association of Realtors® 2007 REALTORS® Conference & Expo.
In 2002, home sales set a new record at just over 5.5 million, and three-quarters of metro areas showed price gains over the previous year. At the time, home buyers were confident that the real estate market was strong and healthy. In 2007, existing-home sales are forecast to be about 5.5 million, and two-thirds of metro areas showed price gains last quarter. Both 2002 and 2007 show strong sales, and homes continue to prove a good long-term investment. But this year, public perceptions are different.
“In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment,” said NAR Chief Economist Lawrence Yun. “2007 will be the fifth best year for housing on record. Places like Houston, the Kansas City area, Indianapolis, and the vast middle section of the United States offer affordable prices and continued job growth. On either coast, Seattle and Raleigh, N.C., remain solid. And markets that experienced recent growth declines – like Boston, Denver, and Washington, D.C. – have already shown signs of recovery. In short, all real estate is local – conditions vary greatly from one city to the next.”
Yun explained that while the recent rise in foreclosures and delinquencies has dampened consumer confidence in real estate, these problems have been concentrated in the subprime market. “For buyers who qualify for conventional financing, mortgages are available at favorable rates,” said Yun. “Major FHA reform will also help first-time home buyers enter the market and will provide safer alternatives for many subprime buyers. FHA market share for home purchases is expected to triple over the next three years, from an estimated 4 percent in 2007 to an estimated 12 percent in 2009.”
Responding to recent questions about the current value of homeownership, Yun said, “Buying a home is not a quick-in, quick-out investment, like buying a stock. Homeownership builds wealth over the long-term.”
To illustrate his point, Yun explained that over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly 5 times the stock market return, at $110,300.
Taking the long-term perspective, John Tuccillo, former NAR chief economist and currently of John Tuccillo and Associates, reflected on recent changes in the current real estate market and outlined what likely lies ahead for the real estate industry.
“The demographics of home buying and selling are shifting significantly, away from baby boomers and toward Generations X and Y,” said Tuccillo. “Baby boomers are still fueling demand for second homes in communities across the country. However, younger generations are emerging as market forces, and their influence will change how real estate practitioners do business.”
Tuccillo explained that members of Generations X and Y focus on the bottom line. Consequently, the four elements of time, stress, convenience and service will influence these younger consumers’ perceptions of value.
“Technological mastery will become even more important, moving forward,” said Tuccillo. “Realtors® must learn to integrate new channels of communication into their businesses. As with other industries, real estate professionals must efficiently meet the needs of their clients while providing the world-class customer service to succeed.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of residential and commercial real estate industries.
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NAR Survey Shows Americans Believe Buying a Home Still a Good Financial Decision
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LAS VEGAS, November 14, 2007 -
Americansi remain convinced that buying a home is a good long-term nvestment. That’s just one of the findings from the 2007 National Housing Pulse Survey, released today during the annual REALTORS® Conference & Expo, here through November 16.
The survey measures how affordable housing issues affect consumers. This year’s results show that nearly nine out of 10 consumers believe that buying a home is a good financial decision. Fifty-nine percent of respondents also agree that now is a good time to buy a home; that number is even higher (64 percent) in areas of recent home price declines.
“Owning a home continues to be a good, long-term investment, and most consumers understand that,” said National Association of Realtors® President Pat V. Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. “This new survey clearly shows that people believe in the value of homeownership and know that owning a home is one of the best ways for most families to build a nest egg.”
This year’s survey shows that Americans are more concerned about obtaining a mortgage and having enough money for down payment and closing costs than they have been in five years of polling. Nearly six in 10 respondents believe it’s difficult for people in their area to obtain a fair and affordable mortgage. More than eight in 10 say having enough money for down payment and closing costs are obstacles for home buyers in their area, up 17 percent from 2005. Sixty-three percent also think the mortgage approval process is an obstacle, up 13 percent since 2005.
“Buyers in the conventional market can still obtain mortgages at very favorable rates,” said Combs. “In addition, NAR is advocating for FHA modernization; changes to this program will help many more first-time buyers become homeowners.”
Of those surveyed, more than one in five homeowners have some type of variable-rate mortgage, including interest-only (15 percent), adjustable-rate (6 percent) and a balloon or other large payment due in the next five years (2 percent).
These homeowners feel more strain from their monthly mortgage payment than those with fixed rates. In fact, more than half of those with variable-rate mortgages say they feel a significant or slight strain, whereas fifty-three percent of those with fixed-rate mortgages feel little or no strain at all. Despite these findings, only five percent of respondents say they are very or fairly worried about being able to make their mortgage payments over the next year.
When it comes to challenges facing the mortgage market, Americans are split on the need for more federal government oversight. Forty-seven percent believe the federal government should take a more active role, while 45 percent believe oversight is the private sector’s responsibility.
While 32 percent of those surveyed perceived the rate of home foreclosures in their area to have increased over the past year, 39 percent report the rate has remained about the same; 6 percent believe the foreclosure rate has decreased in their area. When asked how big of a problem foreclosures were in their area, 38 percent of respondents said foreclosures were a very big or moderate problem, but the majority, 51 percent, said foreclosures were only a slight problem or not one at all.
“Realtors® are in the business of helping people into homes, and we want to make sure they can afford to stay there,” Combs said. “NAR believes that one foreclosure is one too many, and we are working with government agencies, lenders and consumer groups to protect home buyers and sellers in the real estate transaction and beyond.”
The lack of affordable housing continues to be a greater concern than jobs, crime, terrorism or the environment. Nearly seven in 10 survey respondents are concerned about the cost of housing in their area. In the short term, more than half of survey respondents believe home sales and values in their neighborhood will remain about the same in the next three months. Only one-fourth of those surveyed believe sales and values will continue to decrease, while about 10 percent believe they will rise.
The 2007 National Housing Pulse Survey is conducted by NAR’s Housing Opportunity Program. The telephone survey was among 1,000 adults living in the United States in October 2007. The study has a margin of error of plus or minus 3.1 percentage points.
The Housing Opportunity Program was created in 2002 to provide Realtors® with the tools and information they need to promote housing opportunities in their community, in both the rental and homeownership sectors of the market. The program encourages local Realtor® associations to create housing opportunity initiatives aimed directly at helping consumers gain access to housing. To date, nearly 600 state and local associations have such programs in place.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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