Lawrence Yun, NAR chief economist, said a weakening was inevitable. "Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November," he said. "December's housing market activity could be comparably lower due to ongoing problems in the economy, so a real estate-focused stimulus plan is urgently needed."
Yun said the outlook will depend heavily on the stimulus package. "With a proper real-estate focused stimulus measure, home sales could rise more than expected, by more than 10 percent to 5.5 million in 2009, and easily begin to stabilize home prices in many parts of the country. Stable home prices will, in turn, lessen foreclosure pressures and lay the foundations for a solid economic recovery as the nation's 75 million homeowners regain confidence," he said.
The impact of mortgage interest rates declining to near 50-year lows in December is not reflected in current data.
The PHSI in the Northeast dropped 7.2 percent to 63.2 in November and is 14.6 percent below a year ago. In the Midwest the index fell 6.7 percent to 74.2 and is 10.1 percent below November 2007. The index in the South declined 2.2 percent to 85.3 in November and is 12.7 percent below a year ago. In the West, the index was down 2.4 percent to 101.2 but remains 19.3 percent higher than November 2007.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there can't be an economic recovery without a focus on housing. "It's crucial for Congress and the new administration to move quickly to remove impediments and offer home buyers the incentives they need to tap into today's historic low mortgage interest rates," he said.
"NAR advocates expanding a $7,500 tax credit to all home buyers and eliminating the repayment feature, and permanently raising loan limits to bring down interest rates for many buyers in high-cost areas. We also need to expedite short sales and unclog the mortgage pipeline," McMillan said.
The 30-year fixed-rate mortgage should hold fairly steady through the first half of the year and rise slightly in the second half. NAR's housing affordability index, which looks at the relationship between home prices, mortgage interest rates and family income, is on track to match a record high set in 1972.
"The unique housing affordability conditions in today's market underscore the opportunity in giving consumers the necessary incentives to stimulate our economy through a housing recovery," Yun said.
