Federal Efforts May Be Taking Hold

The housing stimulus package passed by the federal government earlier this year is working its way through the system.

May 1, 2009

Are housing markets finally turning around? Existing-home sales increased 5.1 percent in February to a seasonally adjusted annual rate of 4.72 million units. The rise seems sharp but comes off exceptionally soft activity in January, so we’re far from declaring victory. Yet several developments give us reason to hope for a sustainable upturn.

First, the housing stimulus package passed by the federal government earlier this year is working its way through the system. Among other things, it provides a first-time home buyer tax credit of up to $8,000. (For more on the tax credit, read "Getting the Word Out," page 10.) From this incentive we estimate an additional 300,000 sales this year, plus additional sales as trade-up and trade-down buyers jump into the market. The package also restores high-cost conforming loan limits to $729,750, giving more people access to low mortgage rates.

When you combine these stimulus efforts with recent action by the Federal Reserve to increase its use of economic recovery funds to buy mortgage-backed securities, mortgage rates could stay at historically favorable levels for some time.

Affordability also is working for us. Housing affordability levels are at their most favorable mark since the NATIONAL ASSOCIATION OF REALTORS® first started tracking the data in 1971.

To be sure, some hurdles still exist. Underwriting standards are tough, creating a snag for many households that would like to buy. But those who qualify can lock in low rates and enjoy the upper hand in price negotiations.

It’s too soon to tell whether the upturn will last. The homebuying process takes several months, so we’ll need to wait until early summer before we know whether everything the federal government is doing is taking hold. But for now we have reason to hope for the best.

Lawrence Yun
Chief Economist and Senior Vice President of Research at the National Association of REALTORS®

Yun oversees and is responsible for a wide range of research activity for the association including NAR’s Existing Home Sales statistics, Affordability Index, and Home Buyers and Sellers Profile Report. He regularly provides commentary on real estate market trends for its 1.3 million REALTOR® members.

Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, among them the Blue Chip Council and the Wall Street Journal Forecasting Survey. He also participates in the Industrial Economists Discussion Group at the Joint Center for Housing Studies of Harvard University. He appears regularly on financial news outlets, is a frequent speaker at real estate conferences throughout the United States, and has testified before Congress. Dr. Yun has appeared as a guest on CSPAN’s Washington Journal and is a regular guest columnist on the Forbes website and The Hill, an “inside the beltway” publication on public affairs.

Dr. Yun received his undergraduate degree from Purdue University and earned his Ph.D. from the University of Maryland at College Park.