Will Home Sales Rise or Fall This Year?

It depends on who you ask.  Lawrence Yun, Chief Economist for the National Association of Realtors, seems to think they will rise.  Morgan Stanley, however, reports that U.S. home prices will fall 11% this year by John Gittelsohn of Bloomberg.  Both articles are reprinted below.  Clearly we are in a market of unknowns and differentiating circumstances. Although the real estate market is changing rapidly, Real Estate itself hasn't changed one bit; it is still very personal.  The end result depends on your own personal & financial situation. Economists & forecasters pull data from both sides of the fence in order to reach, what I believe is, a foregone conclusion.  Ultimately, you need to figure out what side of the fence you need to be on and do what is best for you & your family.

If anyone advises that this is the perfect time to either buy or sell without knowing your specific circumstances, be skeptical.  Give me a call to make an appointment so we can determine what your buying & selling options are.

Why Home Sales Will Rise This Year

The first quarter ended with decent home sales activity, but the rest of the year should be even better. Here's why. By Lawrence Yun | June 2011

The first quarter ended with decent home sales activity, with existing homes selling at an annualized pace of 5.1 million. The remainder of the year should be better still for the following reasons:

• More jobs
• Rising stock market wealth
• Rising apartment rents
• Continuing high affordability conditions
• Home values at historically justifiable levels
• Investors looking to hedge against inflation
• Foreigners buying U.S. homes on the cheap

Other potential contributing factors, although they’re not happening yet, are huge bank profits translating into more desire to lend and some reduction to market friction as lenders’ short sale approval processes improve and appraisals become less of an issue.

So, if existing-home sales either hold at the 5.1 mil­lion pace of the first quarter or improve on that, then the annual sales tally will easily exceed the 4.9 mil-lion home sales we saw last year.

Still, the stars are not all aligned. There will be obstacles. High gas prices are a daily reminder that something is not right with the economy; that will hold back consumer confidence. Washington policy­makers are debating the ending of government guaranteed mortgages and requiring a minimum down payment of 10 to 20 percent on conventional mortgages, even though the FHA and VA mortgage programs have very low down payments and have yet to require a single dime of taxpayers’ money. And there will be attempts to chip away at the mortgage interest deduction by invoking class warfare—the " let’s go after the rich " approach.

At least through 2011, improving market developments should outweigh the negative impact imposed by Washington policymakers.xisting-home Sales ‘Rebenchmarking’

Learn how NAR plans to ensure the continued accuracy of its existing-home sales calculation in the years ahead: "How NAR Calculates Existing-home Sales"

U.S. Home Prices May Fall 11% This Year, Morgan Stanley Says

April 25, 2011, 4:28 PM EDT By John Gittelsohn  (Updates with comment from analyst in third paragraph.) April 25 (Bloomberg)

U.S. home prices will fall 6 percent to 11 percent this year, more than previously forecast, as mortgages become harder to obtain and distressed sales drive down values, according to Morgan Stanley.

Prices will have lost as much as 39 percent from their 2006 peak through the first half of 2012, according to measures such as the S&P/Case-Shiller index, analysts Oliver Chang in San Francisco and Vishwanath Tirupattur and James Egan in New York said today in a report. Morgan Stanley previously estimated values would drop 35 percent from the peak.

“We revised our outlook lower for two key reasons,” Chang wrote in an e-mail today. “First, home prices have fallen more than we expected since our last published forecast in early December 2010, and second, sales activity has remained weak, especially for mortgage-dependent transactions, which are needed to support the non-distressed market.”

Home values are dropping as foreclosures, which sell at a discount, undermine real estate prices. Distressed properties, including foreclosures and short sales, made up 40 percent of existing home purchases in March, the National Association of Realtors said April 20. Short sales occur when a lender agrees to sell for less than the mortgage balance.

S&P/Case-Shiller

The S&P/Case-Shiller index of 20 U.S. cities will probably show tomorrow that prices fell 3.3 percent in February from a year earlier, according to the median estimate of 23 analysts in a Bloomberg survey. The measure was down 32 percent in January from its July 2006 peak.

The Morgan Stanley forecast calls for a bigger drop than other projections. David Wyss and Beth Ann Bovino of Standard & Poor’s said April 8 that home prices will fall another 4 percent and bottom out in the second quarter of this year. The Case- Shiller index will decrease 5 percent this year and hit bottom by the third quarter, Celia Chen of Moody’s Analytics Inc. said in a March report.

“Our view is we’ll see a 5 percent drop in national home prices this year,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York, said during an April 20 interview on Bloomberg Television. “It could be larger. What dictates that forecast is the share of distressed properties.”

Uncertainty about home-financing and foreclosure regulations are also weighing on values, the Morgan Stanley analysts said. Lenders are tightening standards in the face of proposals to reform Fannie Mae and Freddie Mac; requirements under Dodd-Frank legislation that they retain a percentage of mortgages; and negotiations with state attorneys general to settle foreclosure disputes, according to the report.

--Editors: Christine Maurus, Kara Wetzel

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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