Realtors forecast rebound in 2008 : Early turnaround in home sales predicted

By Mary Umberger | Tribune staff reporter

November 14, 2007

LAS VEGAS - Crediting pent-up demand and palatable interest rates, the housing industry's most visible market forecaster said Tuesday that 2008 will see a turnaround for home sales -- earlier than some other predictions.

"In my view, we are hitting the low right now," said Lawrence Yun, chief economist for the National Association of Realtors. Speaking at two events at the trade group's annual convention here, Yun nonetheless forecast the first year-over-year home price decline since the Great Depression. He said 2007 home sales would average about 2 percent lower than the year before.

Yun said that in addition to the nation's overall economic stability, two factors -- buyers wearying of waiting around for sellers' asking prices to bottom out and a gradual return to stability in the mortgage market -- would fall into place at some point next year to set sales back on a positive track.

Given pent-up demand and historically low mortgage rates, it's a fairly easy call, from my point of view, that we are in a market recovery," he said. But Yun acknowledged that other economists don't share his view of housing, and some project that recovery won't occur until 2009 or beyond.

"I don't think we're at the bottom and I'm hugely optimistic about the overall economy," said Brian Wesbury, chief economist for First Trust Advisors in Lisle. "Generally, we're not done with all the housing pain yet," he said. "There's still a huge amount of unsold inventory [of homes for sale] and that's weighing on prices, along with the numbers of foreclosures. It will be one to three years before the housing market gets better."

Yun's optimism matched a remarkably positive tone at the convention, where attendance was expected to hit 30,000 -- a record, Realtors officials said. Yun said that the housing meltdown resulted from a "period of greed" and blamed mortgage lenders looking for big commissions, global investors seeking "juicy returns" and bond-ratings agencies turning a blind eye to risk. "In the greedy environment we encountered, some people, in my view, were misled into entering home ownership too early," he said.

Later, pressed by reporters, he acknowledged that some in his own profession played a role in allowing the market to become overheated. "We have 1.3 million members," said Yun. "Are some guilty? Certainly some are guilty. Certainly it is not the case to say that all Realtors are clean."

Addressing a press conference, Yun said the slowdown should improve incrementally -- but only if spooked buyers regain confidence that prices aren't going to sink lower. The wild card, he said, is consumer confidence. "The pace is a bit uncertain because we are dealing with the psychology of the buyers."

"If we continue to see first-quarter [home sales] figures going lower, I will be scratching my head because we will be seeing that the psychological factor is stronger than we know."

But Yun stopped far short of predicting a return to a boom, by any measure. His forecast puts 2008 at a statistical pace that looks very much like 2007, described by Yun himself as "a year of challenge." His forecast, unveiled Tuesday, projects 5.67 million existing-home sales in 2007, creeping up to 5.69 million next year. The figure is about 2 million units below the market's peak in 2005. Yun said some of his optimism was based on regional improvement. He said the Midwest's housing market, for example, was a bright spot. "There is absolutely no bubble in that region," Yun said. "It is perhaps underpriced."

Contents provided through Long Island Realtor, Gail Gladstone

Source: http://www.chicagotribune.com/business/chi-wed_housing1114nov14,0,5418919.story