Why Home Sales Will Rise This Year

The first quarter ended with decent home sales activity, but the rest of the year should be even better. Here's why.

June 1, 2011

The first quarter ended with decent home sales activity, with existing homes selling at an annualized pace of 5.1 million. The remainder of the year should be better still for the following reasons:

  • More jobs
  • Rising stock market wealth
  • Rising apartment rents
  • Continuing high affordability conditions
  • Home values at historically justifiable levels
  • Investors looking to hedge against inflation
  • Foreigners buying U.S. homes on the cheap

Other potential contributing factors, although they’re not happening yet, are huge bank profits translating into more desire to lend and some reduction to market friction as lenders’ short sale approval processes improve and appraisals become less of an issue.

So, if existing-home sales either hold at the 5.1 mil­lion pace of the first quarter or improve on that, then the annual sales tally will easily exceed the 4.9 mil-lion home sales we saw last year.

Still, the stars are not all aligned. There will be obstacles. High gas prices are a daily reminder that something is not right with the economy; that will hold back consumer confidence. Washington policy­makers are debating the ending of government guaranteed mortgages and requiring a minimum down payment of 10 to 20 percent on conventional mortgages, even though the FHA and VA mortgage programs have very low down payments and have yet to require a single dime of taxpayers’ money. And there will be attempts to chip away at the mortgage interest deduction by invoking class warfare—the " let’s go after the rich " approach.

At least through 2011, improving market developments should outweigh the negative impact imposed by Washington policymakers.

Learn how NAR plans to ensure the continued accuracy of its existing-home sales calculation in the years ahead: "How NAR Calculates Existing-home Sales"

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.