Sales of previously owned homes – which in recent months
have been buoyed by a growing share of distressed REO and short sales – are expected to
remain on an upward, albeit uneven, track through this year and next, according to economists at the National Association of Realtors (NAR) midyear meeting in Washington this week.
Yun, NAR’s chief economist, characterized existing-home sales as “underperforming” by historical standards,
but he sees gradual improvement ahead.
we just hold at the first-quarter sales pace of 5.1 million, sales this year would rise 4 percent,” Yun said, but he
was quick to add that the remainder of the year looks better than the results seen in the first three months of 2011.
“We expect 5.3 million existing-home sales this year, up from
4.9 million in 2010, with additional gains in 2012 to about 5.6 million – that’s a sustainable level given the
size of our population,” Yun explained.
by NAR earlier in the week showed that bank-owned homes and pre-foreclosure short sales made
up 39 percent of the first quarter’s existing-home sales. According to the trade group’s study, these distressed
properties are selling for discounts in the 20 percent range and
attracting investors looking for a bargain.
huge volume of cash sales, supported by the recovery in the stock market, show that smart money is chasing real estate,”
He notes that this buyer makeup implies there could be
a sizeable pent-up demand from traditional buyers who would need to take out mortgages.
“The problem isn’t with interest rates, but with the continuation of unnecessarily
tight credit standards that are keeping many creditworthy buyers from getting a loan despite extraordinarily low default rates
over the past two years,” Yun said.
to NAR’s chief market analyst, if credit requirements returned to normal, safe standards, home sales would be 15 to
20 percent higher.
Yun expects the median existing-home
price to remain near $170,000 over the next two years, which would mark four consecutive years of essentially no meaningful
Frank Nothaft, chief economist at Freddie Mac, holds similar views on the outlook.
home sales overall to rise 5 percent by the end of the year compared to the annual sales of 2010.
“National home price indices are close to a bottom and prices are likely to bottom
sometime this year,” Nothaft said.
activity in 2011 will be only half of what it was last year, according to Nothaft, and as a result, he says banks may become
more willing to lend to traditional homebuyers, which could set loose some of that pent-up demand Yun spoke of from buyers
who would be borrowers.