Realtors® Wonder When Recession Will Give Way to Real Estate Recovery
ORLANDO, November 07, 2008
Realtors® are on the front lines of the current economic crisis; they see firsthand how credit problems, decreases in home values and rising foreclosures are affecting individuals, families and communities across the country. In today’s Housing Market Outlook Through Economic Recession session at the 2008 REALTORS® Conference & Expo, National Association of Realtors® Chief Economist Lawrence Yun shared insights into how the current recession will affect the real estate industry.
The impact of past recessions on the housing market has varied widely. During the recession of the mid-1970s, home sales remained fairly constant, in contrast to the recession in the early 1980s, which saw deep cuts in home sales. Home sales moderately decreased in the recession of the early 1990s, but home sales actually rose during the recession in the early 2000s.
“Today we’re actually seeing favorable conditions for affordability, and this has led to rising home sales in areas that have seen the most marked home value declines,” said Yun. “Some homeowners who were hesitant before have realized that, in many cases, now is a good time to buy a home.
”According to NAR’s most recent existing-home sales report, the national median existing-home price for all housing types was $191,600 in September, down 9 percent from one year ago when the median was $210,500. In the third quarter of 2008, total U.S. housing valuation stood at $20.3 trillion, down from $22.4 trillion in the third quarter of 2007, but approximately equal to overall valuation at the end of 2005.
Consequently, affordability is as high as it’s been since 2003, as measured by NAR’s Housing Affordability Index. The current index is at 130, which means that a family earning the median family income has 130 percent of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.
This increased affordability has led to improved home sales, as Yun explained in detail. In Arizona, California and Nevada, sales rose 20 percent or more between the first and second quarters of 2008. In Idaho, sales were up more than 51 percent during that same time. Florida and Virginia saw sales increases of over 10 percent during the first two quarters of 2008.
Shrinking inventory is another sign that the real estate market is stabilizing. Inventory of new homes has been falling since a peak inventory of 570,000 new homes in August 2006, and as of September 2008, new-home inventory had fallen to 394,000. Inventory of existing homes was at 4,266,000 in September – a 9.9-month supply at the current rate of sales, down from an 11.2-month supply in April.
“These signs are encouraging, but more must be done,” said Yun. “Our research indicates that an interest rate deduction of just 1 percentage point could result in as many as 840,000 additional home sales, which would further reduce the inventory of homes by as much as 20 percent.
”To encourage more buyers into the housing market, NAR has proposed that the government buy-down mortgage interest rates to ensure fixed low rates for home buyers. NAR also presented a four-point plan to Congress last month recommending, in part, that the repayment feature be removed from the first-time home buyer tax credit, that the tax credit be extended to all buyers, and that higher FHA and conventional loan limits be made permanent – up to $729,000 in high-cost areas – to give buyers in these areas access to safer, more affordable mortgages.
“NAR will continue to press for housing stimulus, but recovery will also depend on restoring consumer confidence, and Realtors® are an essential part of that,” said Yun. “Buying a home has been a path to long-term wealth accumulation for a vast number of homeowners, and Realtors® know this. Our members must share their local market insights and knowledge with their customers and clients to help them make informed, smart decisions in these difficult times.”
Let’s take a look at the South Hampton Roads real estate market activity for this October to see how the year is looking so far:
Virginia
Beach | Sold
Listings | Median
Price | Average
Sale Price | Average Days
On Market |
October 2008 | 366 | $245,000 | $327,725 | 69 |
October 2007 | 495 | $261,000 | $345,796 | 56 |
Chesapeake | Sold
Listings | Median
Price | Average
Sale Price | Average Days
On Market |
October 2008 | 167 | $240,000 | $269,452 | 89 |
October 2007 | 224 | $271,250 | $304,089 | 68 |
Norfolk | Sold
Listings | Median
Price | Average
Sale Price | Average Days
On Market |
October 2008 | 131 | $193,900 | $224,035 | 83 |
October 2007 | 159 | $199,500 | $233,251 | 76 |
Portsmouth | Sold
Listings | Median
Price | Average
Sale Price | Average Days
On Market |
October 2008 | 65 | $154,900 | $166,652 | 96 |
October 2007 | 100 | $178,450 | $203,706 | 68 |
Suffolk | Sold
Listings | Median
Price | Average
Sale Price | Average Days
On Market |
October 2008 | 70 | $262,500 | $276,323 | 93 |
October 2007 | 95 | $279,000 | $298,523 | 79 |
