Home Prices Expected to Recover in 2008 As Inventories Decline
Washington, DC, July 11, 2007 - 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 Assn. of REALTORS®.
Lawrence Yun, NAR senior economist, said a good buyers’ market has evolved. “Buyers now have an overwhelming advantage given the wide selection of homes available in many markets,” he said. “But with profit margins coming under pressure, homebuilders will limit new construction well into 2008. This should help the overall inventory level to move steadily into a more balanced state.”
Existing-home sales are expected to total 6.11 million this year and 6.37 million in 2008, down from 6.48 million last year. New-home sales are projected at 865,000 in 2007 and 878,000 next year, compared with 1.05 million in 2006. Housing starts, including multifamily units, are forecast at 1.43 million units this year and 1.44 million in 2008, down from 1.80 million last year.
Existing-home prices are likely to rise 1.8% to a median of $222,700 in 2008 after a 1.4% decline this year to $218,800. The median new-home price should rise 2.2% to $245,400 next year following a 2.6 %drop in 2007 to $240,100.
“Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008,” Yun said. “Local conditions vary considerably, but with historically low mortgage interest rates this summer and sustained job gains, it could be a good time for first-time buyers with a long-term view to test the housing waters.”
The 30-year fixed-rate mortgage is estimated to average 6.7% during the second half of this year, and fluctuate around 6.6% in 2008.
Growth in the U.S. gross domestic product (GDP) will probably be 2.0% in 2007, compared with a 3.3% growth rate last year; GDP is forecast to grow 2.8% in 2008.
The unemployment rate is likely to average 4.6% in 2007, unchanged from last year. Inflation, as measured by the Consumer Price Index, is projected at 2.6% in 2007, down from 3.2% last year. Inflation-adjusted disposable personal income should rise 3.0 percent this year, up from a 2.6% gain in 2006.