The following is an excerpt from the recent issue of REALTOR magazine, where Chief NAR Economist Lawrence Yun speaks out about the real estate market:
“The housing recovery is surpassing most expectations. Rising demand and many years of
sluggish new home construction have forced home prices to rise at a near double-digit pace in some parts of the country. The latest surveys from the National Association of Realtors, which looked at foot traffic at open houses and inquiries from potential sellers to real estate agents, continued to point toward too many buyers chasing too few sellers. Home prices should continue to rise this year and likely next year as well.
Fast rising home values are clearly good for homeowners, but price increases that are far in excess of income growth are not good for buyers and not a healthy development for the economy. However, it’s important to keep in mind that demand is moving ahead in spite of the stringent lending standards still in place.”
Yun goes on to speculate what the housing recovery would look like if banks and mortgage companies loosened up tight credit – something that many industry pundits are predicting.
From my perspective, there are two more factors that are going to have considerable impact on the pace of recovery moving forward: the first is jobs, and the second is interest rates.
Until consumer confidence as a result of steady job growth rebounds, there is a finite number of buyers with the wherewithal to enter the market. And, once the economy begins a true recovery, the inevitable rise of interest rates is likely to curb the pace of housing activity. For those two reasons, I believe that although we will continue to enjoy a steady clip in housing for the next few years, it will not reach the frenzied activity that we saw in 2004 and 2005.
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