Existing home sales are projected to increase 7.0 percent this year, according to the National Association of Realtors (NAR). The trade group’ Chief Economist, Dr. Lawrence Yun cites a strengthening economy, job gains, and a “healthy” increase in home prices. Lending remains restrictive, but is showing signs of loosening up and allowing a portion of first-time buyers into the market, and affordability is stabilizing.
In the following video, Dr. Yun points to an expanding economy, continued growth in the labor market, and moderately increasing home prices as reasons for improvement not only in existing home sales, but new home sales (the sector most hard hit by the housing crash):
“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current homeowners the ability to use their equity buildup as a downpayment towards their next home purchase,” notes Dr. Yun. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low downpayments and private mortgage insurance.”
Don’t forget about interest rates
In 2014, interest rates remained at historic lows, beating many economists’ projections, but don’t expect that to remain the case. Dr. Yun and others anticipate a rise in interest rates this year, and states that homeowners may be unwilling to move because they are comfortable with their current low interest rate as potential speedbumps that could slow the increased pace of sales this year.
To close the year
With one month of data remaining to report for 2014, Dr. Yun expects total existing-homes sales to finish the year around 4.94 million (down 3.0 percent from 2013), but then rise to 5.30 million in 2015. The national median existing-home price for 2014 will be close to $208,000, up 5.6 percent from 2013, and is expected to moderate to a pace between 4 and 5 percent in 2015.
Note about tone
Dr. Yun’s observations appear to be in line with what his many industry counterparts are suggesting for 2015, as the growing consensus leans toward a positive outcome for the year. In the past, NAR was been accused of blindly using the “it’s always a good time to buy or sell” mantra leading up to the housing crash, but since Dr. Yun has taken the helm, all agree that his assessments have been fair and honest, even when negative (which let’s face it, has been frequent over the last seven years).
The tone of this particular forecast is positive and feels akin to the rose colored glasses assessments of the past that were blatantly wrong, but these projections are based on sound math and fit within the consensus about the outcome expected for 2015. In other words, we’re in for a good year, folks.