NAR: Existing-home median price projected to fall 3.3% in 2011

By Inman News, Monday, August 29, 2011

Pending homes sales in July fell month-to-month for the first-time since April, but rose substantially compared to the same month a year ago, according to a report by the National Association of Realtors.

The trade group’s Pending Home Sales Index rose 14.4 percent year-over-year in July, to 89.7. That’s a 1.3 percent dip compared to June’s index. The index tracks signed, but not closed, purchase contracts for resale homes. An index of 100 indicates the average contract activity in the index’s 2001 base year, which was a record year for existing-home sales.

“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,” said Lawrence Yun, NAR’s chief economist, in a statement.

Yun said that “rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge” bode well for real estate, though “It is now a question of lending standards and consumers having the necessary confidence to enter the market.”

Existing-home sales in July also fell on a monthly basis (3.5 percent), but rose on an annual basis by 21 percent, to a seasonally adjusted annual rate of 4.67 million, according to a separate report from NAR.

The West saw the biggest rise in pending sales in July. The region’s index increased 20.6 percent year-over-year and 3.6 percent month-to-month, to 110.8. The West was the only region where the index rose from June.

The Midwest saw the second-biggest index jump year-over-year, 18.8 percent to 79.1. The region also saw the smallest monthly decrease: -0.8 percent.

In the Northeast, the index rose 9.7 percent from July 2010, to 67.5. That’s a 2 percent dip from June.

The South saw the biggest decrease on a monthly basis in July, down 4.8 percent to 94.4, but saw a 9.5 percent increase on an annual basis.

In NAR’s latest economic outlook, the trade group predicted existing-home sales would remain roughly flat this year compared to last year, bumping up 0.3 percent to a seasonally adjusted annual rate of 4.92 million, with an expected 4 percent rise to 5.12 million in 2012.

NAR expects new single-family home sales to drop 8 percent to an annual rate of 296,000 this year compared to 2010. The association predicts such sales to rise substantially in 2012, however, to 350,000 — an 18.2 percent rise.

The median price for existing homes is forecast to drop 3.3 percent this year compared to 2010, to $167,200. In 2012, the median is expected to rise 2.5 percent to $171,400 — still below the medians for both 2009 and 2010 ($172,500 and $172,900, respectively).

The median price of new homes is expected to rise on a yearly basis both this year and in 2012. NAR predicts the median price of new homes will increase 2.8 percent this year, to $227,200, and another 3.7 percent in 2012, to $235,500.

The association expects the average 30-year fixed mortgage rate to decrease slightly this year, to 4.6 percent from 4.7 percent last year, and to rise slightly in 2012, to 5 percent.

NAR forecasts that U.S. gross domestic product (GDP) will grow 1.6 percent this year and 2 percent in 2012, compared to 3 percent in 2010. Unemployment is expected to dip to 9 percent this year and to 8.8 percent in 2012, compared to a 9.6 percent rate last year.