Real Estate Survey Projects Housing Legislation Will Boost Sales
Some improvement is projected for existing-home sales in the months ahead, with broader gains seen by the fourth quarter as buyers take advantage of provisions provided through the recently passed housing stimulus bill, according to a forecast by the National Association of Realtors.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in June, rose 5.3 percent to 89, from a downwardly revised reading of 84.5 in May. However, the index remains 12.3 percent below June 2007, when it stood at 101.4.
The PHSI in the South jumped 9.3 percent to 92.4 in June but is 16.6 percent below June 2007. In the West, the index rose 4.6 percent to 101.0 in June but remains 1.7 percent below a year ago. The index in the Northeast increased 3.4 percent to 79.6 but is 15.4 percent below June 2007. In the Midwest, the index rose 1.3 percent in June to 79.6 but is 13.3 percent below a year ago.
Among the trends forecast:
Roughly 2.5 million first-time home buyers are expected to take advantage of the temporary tax credit. That will help boost existing-home sales to 7 percent to 5.51 million in 2000m—from an expected total of 5.15 million this year.
The 30-year fixed-rate mortgage, which also has been vacillating, is likely to trend up to 6.5 percent by the end of 2008, and then hold at that level for most of next year. NAR's housing affordability index is forecast to remain favorable this year, averaging 13 percentage points higher than in 2007.
Growth in the U.S. gross domestic product is expected to be 1.7 percent this year and 1.5 percent in 2009. The unemployment rate is projected to average 5.5 percent in 2008 and 6 percent next year.
Inflation, as measured by the Consumer Price Index, is expected to be 4.1 percent in 2008 and 2.6 percent next year. Inflation-adjusted disposable personal income is estimated to grow 1.7 percent this year and 1.1 percent in 2009.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
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