David Lereah is a former senior vice president and chief economist for the NATIONAL ASSOCIATION OF REALTORS®. Today, he is president of Reecon Advisors Inc.
Many of the households squeezed out by tightened lending standards will eventually make it into the market. It’ll just take longer as they save for a down payment and build income to manage payments.
Last year’s correction in housing markets was sorely needed after five years of a booming expansion. But now there are signs that the correction is behind us and a year of stability lies ahead.
Once property prices come down to more suitable levels, households and investors should get back into the real estate game. That might not be too much longer.
Certainly no one wants to see price adjustments dipping into negative territory—as they already are for condos in many markets that were seeing boom times a year ago—but we need cooling prices today to give buyers a chance to get back into the market.
It’s a scenario that seems to defy economic rules, yet we’re seeing it in many real estate markets around the country: Sales prices are rising even as home demand slows.
The Federal Reserve faces a daunting task over the next several months as it tries to keep inflation at bay without pulling the rug out from under our economy’s pillar of strength over the last several years, home ownership.
Faced with the prospect of home sales cooling through the end of this year, it’s tempting to pine for the boom of the last five years, when we saw home sales volume and price appreciation jump 33 percent and 42 percent, respectively, over the period on a nationwide basis. Resist the temptation.
Is real estate brokerage a financial or a commercial activity? The importance of this question was highlighted once again when the U.S. Office of the Comptroller of the Currency released its letters permitting Bank of America to build a hotel, PNC Bank to build a mixed-use project, and Union Bank to take an equity position in a wind energy facility.
After five years of being the primary engine for economic growth in the United States, the housing sector is likely to move to the back burner and could actually contribute to a slowing in economic activity this year.
It’s real estate’s turn to get rained on, with the U.S. Department of Justice filing an antitrust lawsuit against NAR’s Internet display policy, Hurricane Katrina, and a blue ribbon tax commission appointed by President George W. Bush eyeing potentially disruptive changes to the mortgage interest deduction and capital gains taxes.
Lawmakers tend to become concerned with competitiveness when an industry consolidates and the number of companies servicing customers shrinks. That’s why talk in Congress about the level of competitiveness in residential real estate is as puzzling as can be.
Analysts are wringing their hands over Alan Greenspan’s conundrum: long-term interest rates failing to go up as the Federal Reserve raises short-term rates.
It’s good sense to keep a steady eye on trouble spots. But the bottom line for housing remains good. The economy is growing, people are working, financing costs are low, and demand remains high.
As our legendary home sales boom eases, analysts are tripping over themselves to say real estate will lose its attraction as an investment compared with stocks and bonds. Nothing could be further from the truth.
There’s little reason to fear our great housing boom is ending. We’ve been anticipating a slowing in housing activity for a while, and it’s welcome news.
Optimists and pessimists contribute to society in different ways. The optimist invents the airplane; the pessimist invents the parachute. When it comes to housing, should we be booking our flight or checking our rip cord?
Home price appreciation figures mask a country growing increasingly divided between households enjoying strong appreciation gains and those largely without. That division tells us how communities are faring in the competition for jobs and, by extension, how robust their home sales markets will be in the years ahead.
Our public and private sectors have worked together to make the buying and selling of real property not only a priority but also a safe and efficient process.
