Economic Forecast Calls for Rise in Home Prices and Decreasing Housing Starts
July 11th, 2008 categories: Our Market
The National Association of Realtors forecasts an increase in home sales nationwide in the second half of 2008 and in 2009, a 5% increase to 5.58 million sales. May sales around the country declined after the sharp increase of the previous month. Economists say the pullback was expected after April’s performance.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed. The PHSI in the West slipped 1.3 percent to 97.5 in May but is 2.0 percent higher than May 2007. This is a sign that while we are not yet ‘out of the woods’ but nearer by far than we were a year ago.
Lawrence Yun, NAR Chief Economist, said location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.”
Double-digit pending sales gains in May from a year ago were notied in Colorado Springs, Colo.; Sacramento, Calif.; and Spartanburg, S.C.
Based on current indicators, the 30-year fixed rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year and remain fairly steady in 2009.
The national aggregate median existing home price is projected to fall 6.2 percent this year to $205,300 and then rise 4.3 percent in 2009 to $214,100. New home prices are anticipated to decline 3.2 percent in 2008 and rise 5.3 percent in 2009. Housing starts, including multifamily units are likely to fall 28.7 percent this year due to higher construction costs and inventory conditions. An additional 9 percent decrease in starts is expected in 2009 which will impact locations where economic growth provides the need for more housing. San Diego county may be feeling the housing squeeze in 2009 which will put upward pressure on home prices, particularly those in areas near core employment hubs .
San Diego’s diverse employment sectors help sustain positive growth in our local economy. San Diego is the 3rd most popular tourist destination in the country and this brings new money into our economy all year long from all over the world. Our bio-research and technology sectors are bringing new business and high wage earners to the county and the peerless climate and environment make everyone who lives here most fortunate. Find your dream home today at a great value and join the fortunate few who call San Diego county home.
