Home prices are expected to recover in 2008, with existing-home sales picking up late this year and new-home sales rising early next year, according to the latest forecast by the National Association of Realtors.
The Washington, D.C.-based NAR last month projected that existing-home sales will total 6.11 million units this year and 6.37 million in 2008, down from 6.48 million last year.
New-home sales were projected at 865,000 this year and 878,000 in 2008, compared with 1.05 million in 2006. Housing starts, including multifamily units, were forecast at 1.43 million units this year and 1.44 million in 2008, down from 1.80 million last year.
According to Lawrence Yun, senior economist for the Washington, D.C.-based NAR, home buyers “have been getting mixed signals about the housing market, which is causing some of them to hesitate.
Said Yun: “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path. Although general buying conditions remain favorable for long-term home buyers, it appears some buyers are looking for more signs of stability before they have enough confidence to make an offer.”
Yun pointed to “an accumulating pent-up demand” resulting from household formations that are significantly below levels that would be expected in a period of job creation and economic growth.
“As consumer confidence improves, home sales will rise,” he predicted.
Remodeling ActivityNAHB Index Slows in Q2 ’07
Remodeling activity slowed slightly in the second quarter of 2007, according to the National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). The current market conditions component slipped from 46.1 to 44.8 on a seasonally adjusted basis, and the future expectations measure declined by more than two points to 44.1. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view the market conditions as improving.
“While we have experienced some weakening in the remodeling market, activity has remained relatively steady,” said NAHB Remodelers chairman, Mike Nagel, CGR, CAPS, a remodeler from Chicago. “We may have seen a decline in the number of major remodeling projects; however, the market has been buoyed by an increase in the number of homeowners requesting smaller scale projects and home alterations.”
Regionally, the Northeast exhibited some improvement with RMI readings jumping from 43.4 in the first quarter to 49.5, and future expectations remaining relatively flat at 44.1 compared to the previous quarter reading at 44.3. Other regions of the country reported declines in their RMI components. Current conditions in the Midwest fell from 47.5 to 44.5 and future expectations moved from 44.7 to 43.7. In the South, current market conditions declined from 45.9 to 42.3 and future expectations moved from 50.7 to 45.0. While the West showed a decline in current conditions from 48.2 to 46.8, future expectations jumped from 45.0 to 46.0.
“Not surprisingly, the remodeling market is following the downswing we are seeing in the overall housing market,” said NAHB chief economist, David Seiders. “We expect some further erosion in the second half of this year and in 2008, followed by a gradual recovery in 2009 and beyond.”
In the homeowner and rental components of the RMI, current activity for owner-occupied units remained flat at 47.5 compared to 47.7 in the first quarter, while the rental-occupied segment declined from 44.5 to 39.1. The future expectations for owner-occupied units decreased from 46.4 to 43.2, while the rental component declined from 41.4 to 37.3.
Lower Prices Seen Affecting Consumer Sentiment
Following record performance in house price appreciation at the height of the housing and remodeling boom of 2004 and 2005, nominal housing values fell 6 percent in the second quarter of 2007. The S&P/Case-Shiller Home Price Index are seasonally adjusted and annualized.
But for remodelers gauging the consumer sentiment of their local market, the story is mixed. Some metropolitan areas are posting large gains like Provo, Utah (up 20 percent this year), while others like San Diego are posting home price declines (down 2 percent).
Qualified Remodeler Hosting Top 500 Seminar Oct. 9
Qualified Remodeler magazine is hosting a four-hour marketing seminar aimed at the needs of the industry’s largest remodelers, the 2007 Top 500, but any size firms are welcome.
The event will be held from 11 a.m. to 4 p.m. Tuesday, Oct. 9, 2007 at The Wynn Hotel in Las Vegas.
Two well-known remodeling market speakers, Rich Harshaw and Rick Grosso, are set to present.
Harshaw will talk on the topic of how to generate leads and Grosso will focus on closing the sale. Tickets are $50.
To register go to www.qualifiedremodeler.com/top500vegas or call Heidi Riedl at (920) 568-8316.