Housing market expected to slowly rebuild in 2007

By Justin Hunter

Any positive housing market news will loom big in the upcoming year as 2006 caught much of the real estate industry off guard. Home sales and price rates both experienced significant declines in the past year, not to mention the growing rate of foreclosures due to nontraditional mortgage defaults. The real estate industry never new what hit them until it was too late and all that could be done was to look forward to a profitable New Year.
But 2006 was not the worst year on record for the United States real estate industry and in fact, statistically speaking recorded to be a very productive year. It just failed to meet expectations that were perpetuated from the previous five years (2001 to 2005), also referred to as the “boom.”
While the boom may not be heard for a few more years, economists have every right to expect a happier new year in 2007. The article, “Home Prices Seen Rising in '07,” written by Champion Walsh and published in the January 11, 2007 edition of The Wall Street Journal, explains how almost every aspect of the real estate industry is expected to experience slow improvements heading into 2008.
The most important aspect everyone involved in the real estate industry seems to be focused on in 2007 is home prices. Many economists expected sales to decline in 2006 as a correction to the boom but a price correction was less anticipated. If the market is going to experience a successful rebound this year, prices will need to increase once again. Obviously a number of factors will have to come together to accomplish a home value regeneration.
“U.S. home sales will decline less sharply this year than they did last year, while home-price appreciation is expected to gain steam, the National Association of Realtors said.”
Home sales are expected to decline again in 2007 but at a much slower pace than in 2006, which will ultimately allow prices to slowly increase throughout the year.
“In its latest forecast, the NAR said sales of existing homes are likely to decline about 1.2% this year to 6.42 million, following a sharp drop last year, while sales of new homes is seen falling about 9.7% to 957,000.”
The reason home prices will increase at a higher percentage this year even though sales should slowly decline is due to the status the real estate market is starting off at in January. The market at the beginning of 2006 was coming off record sales and price appreciations, so any decline in these obviously would create a larger impact than if the market started lower.
“The Realtors' group, which is running a $40 million ad campaign designed to encourage consumers to contact their local realtors, expects moderate price increases this year. The group forecasts the median sales price for existing homes to grow 1.5% nationally to $225,300, following last year's estimated 1.1% rise. The national median price for new homes will increase 3% this year to $248,900, according to the NAR, after estimated growth of 0.3% last year.”
However, just because prices are expected to increase nationally does not mean that some local markets will not experience a difficult 2007 campaign.
“Mortgage Bankers Association chief economist Doug Duncan expects home prices to rise 1% to 2% annually for the next couple of years. But some markets could see price declines of 10% to 20% this year, he says, a shift from the last four to five years, when there were ‘almost no markets where prices were declining.’”
But this is expected as every local market is different and will be affected by national figures at different paces.
The overall consensus though is that 2007 will not be a banner year for the real estate market but it will be the beginning of the end of 2006’s decline.