WASHINGTON, December 10, 2007

Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors®. However, a recovery for new-home sales is unlikely before 2009.

Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.

The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.

“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”
Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.

“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”

Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”

New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.

The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.
Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.
The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.


Bigger IS Better!

Oversized Garages
a Must-Have for Many Homebuyers

Oversized garages with two or more parking spaces are a must-have feature for many homebuyers, even during times of elevated gasoline prices, according to a report released by the National Association of REALTORS.
According to the "Profile of Buyers' Home Feature Preferences," 57 percent of recent buyers considered a large garage very important to a home - that's 16 percentage points higher than the last time the question was posed in the 2004 survey.

Of the buyers who purchased homes without an oversized garage, 56 percent of them said they would have paid more for the feature. Only six percent said the same in 2004.
And while homes are getting bigger, they have fewer bedrooms, the study found. The size of the typical home purchased in 2006 increased by about 100 square feet, compared with 2004, but the median number of bedrooms dropped from four to three.

Other features considered "very important" by many homebuyers included:

* Air conditioning (ranked "very important" by three out of four buyers)
* A walk-in master bedroom closet (53% of buyers)
* Hardwood floors (28% of buyers)
* Granite countertops (23% of buyers)
* Cable or satellite TV-ready (46% of buyers)


The Next Economic Power Source

By Oscar Gonzales
RISMEDIA, August 7, 2007–We frequently hear about the shifting generational differences that are taking place among today’s home buyers; how aging Baby Boomers are becoming a lucrative customer niche and how aging brokers and agents are not keeping up with the highly technical and wired 30-somethings.
Still, as the population grows and changes, the brokering of property continues to be practiced relatively unchanged and broker profitability continues to decline year after year. What is fundamentally being overlooked is a home-buying segment that possesses $2.1 trillion of buying power and is expected to grow to almost $3 trillion in the next four years. That overlooked economic power source is emanating from the multicultural consumer.
This is not another opinion or comment on social advocacy that instantly fills your head when you hear the words “multicultural” or “diversity.” It is about the economics and emotional intelligence required to capture those dollars.

The Family Evolution
In the Hispanic market, there is a complex dynamic underway, given the different levels of acculturation and language proficiencies living in one household. For example, traditional family roles have changed where the Hispanic woman is now contributing to the overall household income, while the immigrant children may serve as the go-to person for translating and explaining the U.S. culture. The home-buying process is a multigenerational process in which each member of the family has input.Among African-American families, there is a higher number of female head of households, which facilitates liberal attitudes about gender roles. There is also an increasing number of African-American women choosing to remain unmarried.

Evolution of Trust
One characteristic of the multicultural consumer is the placement of family as the trusted advisor above anyone else. This cultural value is demonstrated more in the immigrant population and is partly due to the lack of trust in business and government in their respective countries. By engaging multicultural consumers and creating a culturally friendly environment, trust among this consumerbase will broaden for an organization.

Multicultural Challenges
Multicultural home buyers want to be addressed in a manner that culturally connects with them. As organizations seek to develop cultural connectivity, understanding the importance of one-on-one relationships is equally important when examining the approach utilized with each multicultural group.




As the rest of the housing market struggles, the very high end is thriving.

The Dallas-based Institute for Luxury Home Marketing estimates that home sales at the $5 million-plus price range rose 11 percent in 2006, compared to a 8.4 percent decline in overall housing market sales. Between 1999 and 2005, the institute says, sales of homes for more than $1 million skyrocketed over 500 percent. Today, there are seven homes on the market priced at $100 million or more. In 2005, there was just one.

Granted, it is easy to have those stats with such few numbers, but it is an obvious change...


Housing Report From Harvard...Hold On Tight

Harvard releases the 2007 State of the Nation's Housing report

The U.S. housing market continues to struggle
under a cloud of sharp drops in housing demand and an oversupply of stock, according to this year's State of the Nation's Housing report from the Joint Center for Housing Studies at Harvard University. After years of setting records, housing starts and sales fell in 2006 and are on track to end this year lower. Homebuyers on the margin of qualifying for mortgage loans finally pulled out of the market, despite the availability of creative mortgage products. As buyers left, home sales fell and house price appreciation slowed in some areas and fell in others. Higher home prices and interest rates finally tempered demand, explained Nicolas P. Retsinas, director of the Joint Center for Housing Studies. Many buyers are now waiting on the sidelines hoping prices will fall.

The problems in the housing market put a downward pull to the big lift that housing had given the economy since the 2001 recession. In the latter half of 2006, the drop in home building was so drastic that it shaved more than a full percentage point off national economic growth. Though builders cut back on housing starts, the numbers of vacant homes for sale rose by more than 500,000 from the fourth quarter of 2005 to the fourth quarter of 2006 and continued to rise in the first quarter of 2007.

Still, the nation's largest housing challenge remains housing affordability. "In just one year the number of households spending more than half their income on housing increased a startling 1.2 million to 17 million in 2005," notes Rachel Drew, research analyst. "Even if prices or rents soften for a period of time, the nature of U.S. labor markets, the regulatory restrictions imposed on residential development and the fiscal limits of government assistance to cost-burdened households will make affordability a long-term challenge." Some Americans try to escape these cost burdens by taking longer commutes and incurring higher travel costs, while others double up or live in substandard housing or undesirable neighborhoods. The prospects for a substantial easing of these problems are slim in the near future.


Younger Buyers Purchasing Retirement Homes

Buying Trends

Retirement-home sales are growing...among buyers still decades away from retiring. From New York's Catskill Mountains to Oregon's rocky coast, younger couples who might otherwise be focused on building a nest egg instead are buying a lakefront house or country cabin that they hope to one day use in retirement.
For these younger buyers, this isn't an extension of the real estate investment bug that bit a few years ago and is now fading as home prices flag in many markets. And they're not throwing financial caution to the wind just because they want a second home. Instead, they're crunching the numbers and making hard decisions about their personal finances. In some cases, they're receiving an inheritance or a stock grant and are choosing to invest in their future real estate needs rather than the stock market. In other cases, they're altering their expectations about how long they'll work and the kind of returns they'll earn on their nest egg in order to pursue an emotional investment.
No one knows how many younger buyers are out snapping up their retirement homes. But real estate agents and financial planners around the country say they're increasingly assisting younger buyers spending $100,000 to $500,000 for a house to call home in retirement. Partially at play is a cultural shift planners say they see among younger savers who aren't content to just accumulate assets to use in retirement. Instead, this younger generation wants to put some of its nest egg to work today as an investment in family. (Jeff Opdyke, The Wall Street Journal Online)



Vacation-Home Sales Rise, Investment Sales Drop

Second-home sales were mixed in 2006, with the combined total of vacation- and investment-home sales accounting for 36 percent of all existing and new residential transactions - down from 40 percent of sales in 2005, according to the National Association of REALTORS.
NAR's annual Investment and Vacation Home Buyers Survey shows vacation-home sales rose 4.7 percent to a record 1.07 million in 2006 from 1.02 million in 2005, while investment-home sales fell sharply, down 28.9 percent to 1.65 million in 2006 from a record 2.32 million in 2005. By contrast, primary residence sales fell 4.1 percent to 4.82 million in 2006 from 5.02 million in 2005.
Twenty-two percent of all homes purchased last year were for investment, down from a 28 percent market share in 2005, while another 14 percent were vacation homes, up from a 12 percent share in 2005.
The report pegged typical vacation-home buyers as 44 years old, with median household incomes of $102,200. About 42 percent purchased vacation properties closer than 100 miles from their primary residence and 32 percent were 500 miles or more away. Some 79 percent said the primary reason for their vacation-home purchase was to use the home for vacations or as a family retreat. Other factors that influenced the buy include: 34 percent to diversify investments, 28 percent to use as a future home, 25 percent for the tax benefits, 22 percent for use by a family member or friend, 21 percent because they had extra money to spend and 18 percent to rent to others.
In terms of location, 29 percent of vacation homes were purchased in rural areas, 24 percent in resorts, 22 percent in a suburb and 10 percent in an urban area or central city. Sixty-seven percent were detached single-family homes, 21 percent condos, eight percent townhouses or rowhouses and four percent other.

Go to www.mcnelisgroup.com for the latest in vacation and investment opportunities!