Housing Heads Towards Recovery

The sun has been shining down on the housing market lately with positive news in home sale activity and the move to extend and expand the tax credit. This week, the sun is shining in San Diego, CA with its target at real estate professionals who are in town to attend the National Association of REALTORS® Conference and Expo and anxious to hear from leading economists about the outlook for the market in the year ahead. While the sun is bright here in San Diego  there is still a chill in the air…temperatures dropped when the REALTORS® came to town but certainly not the temperament of those attending who are anxious to hear the latest on economic trends and new business strategies.

What they heard at a standing room only Economic Issues and Residential Business Trends forum:  housing recovery is on a rebound that can only improve with added stimulus from the recent extension and expansion of the homebuyer tax credit.

Lawrence Yun, Chief Economist for the National Association of REALTORS®, proclaimed the tax credit is working to stimulate the economy and preserve the middle class wealth in the country.

The tax credit alone has raised sales by 350,000-400,00, sales that might otherwise have not taken place as a result.  The tax credit will also benefit close to 2.3 to 2.4 million buyers this year. First-time buyers accounted for 47% of the market this year, up from 41% from last year–according to the 2009 NAR survey of Homebuyers and Homesellers. In 2010 existing home sales may get a boost of about 15% as a result of the tax credit–with sales expected to total 5.69 million in 2010, rising 13% over 2009. And home prices may get a boost of 3-5% in 2010. Another positive sign is inventory levels are coming down and prices are beginning to stabilize, Yun says. He estimates home values will continue to turn positive. For eight straight months, pending sales have been on the rise nationally. The lower end of the housing market is seeing strong recovery. But the fact remains buyers in this market are a little more cautious about staying within their budget and are shopping conservatively and that includes for their home.

In 2000, there were 11 million renters with qualifying income to buy a median priced homes. In 2009, that figure rose to 16 million. There is a tremendous pent up demand to buy and the tax credit will bring buyers into the market, Yun says.

Home value is key to everything. With home value recovery on its way, it will move to lessen foreclosure pressure and reduce default rates. More homeowners who see recovery on its way will more likely make payments on their mortgages and reduce risk of foreclosure, Yun estimates.

With home values beginning to stabilize, it will mean more a durable economic expansion. Good news from Yun.  We are coming out this recession with inflation managed for the long-term. Unemployment will eventually turn around,” he said.

Let’s hope for more sunny days ahead for the Illinois real estate market.

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