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Headlines about the U.S. economy range from bleak to pragmatic to hopeful. The rise and fall of oil prices, stocks, the job market, the housing market, and the dollar all add up to a murky cloud of economic uncertainty. And, of course, like real estate, market woes are local. So what does all this really mean to your association? RAE turned to NAR Chief Economist Lawrence Yun for answers.
“A weakening job market and home sales that have been stuck at levels similar to 10 years ago have an implication for AEs in regards to membership. I don’t project membership falling back to 1998 levels. Nevertheless, the soft home sales for the last three years will inevitably make it difficult for some members to survive financially. There is generally a lag time of about two years before a member decides to hang it up for good. Therefore, expect lower membership figures for most associations in 2008 and 2009. A 10 percent decline in each of these years is a reasonably good bet for many associations. Based on the fact that a typical REALTOR® income for those with less than two years of experience is below the poverty level, the members who are leaving the industry will likely be the ones who joined only in recent years.
“Some local associations will fare better than -others, and that will directly correspond to the health of the local housing market. And home sales activity is, figuratively speaking, all over the map now.
“As of July, the home price decline was the sharpest in the West region, falling 22.2 percent. The -lower prices have enticed buyers back into the marketplace, however, and home sales rose the strongest in the West region as a result.
“At metro levels, sales are zooming—more than double or near double in Sacramento, Riverside (Calif.), Fort Myers (Fla.), and Las Vegas. There are many reports of multiple bidding in these markets. Does that mean that a bottom has been reached also in terms of prices in these markets? Could there be a snap-back in prices after overcorrecting? Or will price gains be a slow-moving process? Only time will tell.
“Solid gains were also noted in northern Virginia, Orlando, and Monterey (Calif.), yet most markets continue to see 10 to 20 percent lower sales from a year ago. Chicago, Pittsburgh, Cincinnati, Indiana-polis, and Kansas City fall into that category. Bigger declines were observed in Seattle, Portland (Ore.), Nashville, Charlotte, Atlanta, and Maryland. Many Texas markets also witnessed about a 10 to 20 percent sales decline despite very healthy local economies and job gains. The sales decline is no doubt -attributable to tighter mortgage conditions.
“With the federal government takeover and backing of Fannie May and Freddie Mac, mortgage rates will be somewhat lower for the next 12 to 18 months. This is to ensure continued flow of capital to the housing market given the importance to the economy. Once the housing market recovers, there will be a genuine reform of Fannie and Freddie. NAR and its 1.2 million members will be in the thick of the discussion because mortgage credit is central to the realization of the American Dream of homeownership for consumers.
“One clear positive for the outlook is the housing stimulus package that was recently passed. A homebuyer tax credit of up to $7,500 could help jump-start those markets still struggling. (The tax credit will need to be repaid, but there is still a net benefit for consumers even after repayment). The permanently higher loan limit will permit more people to have access to lower interest rate loans, particularly in high-cost regions of the country.
“My outlook, therefore, is for improving home sales toward the latter half of 2008 that will carry forward to 2009. If these projections can hold, then membership figures will broadly stabilize in 2010. But remember, all real estate is local. Some markets will see a quicker and sharper recovery than other markets.”
Read more economic forecasts, figures, and research at nar.realtor/research.
Lawrence Yun is the chief economist and senior vice president of research of the National Association of Realtors® in Washington, D.C. He can be reached at 202/383-7519 or lyun@realtors.org.