Housing Recovery: The Pieces Are There, But the Certainty Isn’t

Pieces are in place for housing to continue on its road to recovery but there remain plenty of uncertainties that can derail the market, NAR Chief Economist Lawrence Yun said at a conference earlier this week.

Sales flat. Click to enlarge.

Yun told more than 800 attendees at the CRE Finance Council annual conference in Washington on Tuesday that for the last four years home sales have been essentially flat, at roughly 4.2 million homes, but NAR is forecasting a solid increase by the end of this year to about 4.6 million sales.

High affordability. Click to enlarge.

The reason: affordability remains at an all-time high, interest rates remain low, foreign buyers and investors remain interested in residential real estate, and the U.S. economy is strengthening, albeit modestly.

At the same time, corporations continue to sit on strong profits, the stock market is still heading up, and inflation remains relatively subdued. What’s more, pent-up demand continues to build and rentals are getting pricier. Home prices nationally have appeared to stabilize and all major home price trackers show prices going up in many areas, a trend that should help boost confidence among buyers and sellers.

Hefty profits. Click to enlarge.

All of these are positives, but there remain challenges holding back a more robust recovery in the housing market. Aside from continuing concerns over the financial health of Europe and other parts of the world, the improvement in the U.S. economy remains modest at best, job gains still have a long way to go before the U.S. makes up for the 8 million jobs lost during the recession, home mortgage lending remains tight, and the federal budget deficit continues to weigh down on the country’s prospects.

Risks to growth. Click to enlarge.

The other area of uncertainty is what Washington will do. Until the real estate industry gets clarity on the rules and legislation coming down the pike in the next year, lenders are unlikely to restore their underwriting standards to something more normal. For example, the qualified residential mortgage (QRM) rule: will regulators publish a rule next year with a minimum downpayment requirement on “safe” loans? Will other provisions implementing the massive Dodd-Frank Wall Street reform law from two years ago chill lenders’ willingness to lend? What tax law changes, if any, will Congress talk about over the next year?

Then there’s the massive federal tax expenditures expiring at the end of this year. How Congress handles these $4 trillion or so in provisions could have a major impact on how well the economy does.

The bottom line: Despite all the favorable pieces in place for a meaningful housing recovery, the economy continues to be beset by uncertainty, and that’s leaving it an open question how much the housing market can recover in the next year.

Access all of the slides Yun presented at the conference.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

More Posts

  1. If the government continues to tax the people to death, and if job creation worsens, consumer’s confidence will tank, negatively impacting the housing industry.

  2. We have a lot of buyers but the inventory is low in our marketplace in Long Beach California and the surrounding beach communities. So we are having to come up with creative ways to find homes and condos for them to purchase. Do the banks still have a lot of inventory that they are sitting on until the election is over?

  3. Tom Morris

    Brace for a surge in Foreclosures/Short-Sales to flood the market. Having a job and a steady paycheck is necessary for a turnaround in the housing market, but by itself is not sufficient as the “wealth” factor of buyers needs to commensurately improve also.

  4. Caroline Lubers

    Hello, I would like to draw your attention to the publication of ” 2015 – The big fall of Western real estate” anticipating the major trends affecting the real estate market now. As we arrived at a historical turning point, this book is a real tool for support on decision making, to know the trends and especially to know when to sell, when to invest or if it is better to rent … http://www.anticipolis.eu/en_index.php


    Frankly, no surprise Harvard’s forecast tracks with Mr. Yun’s consistent forecasts for a slow but recovering housing market. A liberal think tank supporting a lobbyist for Realtors, both bent on propping up an administration’s policies on economic recovery. Well at least half of “hope and change” is being accomplished………they consistently paint a picture of hope, but nothing changes…..for the better. Any doubters can review Mr. Yun’s comments on the housing market since 2008 and understand the aforementioned. Regardless, if you want an accurate picture of the housing market…..think local and use their data. In Texas, it is the Texas Real Estate Center at Texas A&M University. Hook ’em & Gig ’em.

  6. Thank you for an honest assessment. What is the latest issue with the Healthcare Law decision going to do to the housing market?

  7. Las Vegas real estate is selling tons of properties —- if you have cash to buy them. The buyers with excellent credit and money for a healthy down payment have no chance on getting an affordable home. It relates to the safety of a cash purchase since no appraisal is done. Sellers and banks have no fear of mid-escrow changes due to area comparables and past sales. Multiple offers are pouring in on all levels of properties but especially those below 100,000 which are so attractive yet unattainable for those without cash to buy. We are creating a new real estate bubble in Las Vegas: let us hope the dream of home ownership is not totally destroyed for middle Americans. FYI: also affected is the cost of renting a home for those who have lost their residences to short sales, foreclosure, and job losses.

  8. I agree with Vanson III. Mr. Yun has painted nothing but a positive outlook during the downturn. His comments about the market recovering when prices were spiraling down made it obvious to me that he isn’t a great forecaster of the future. If anything this uptick in the market will be a blip on the screen like the $8,000 tax credit caused a few years ago. We will not see a true recovery until jobs are created. Job creation is ALWAYS the force behind any recovery. Unfortunately, we are still losing jobs, and with our current tax structure we will continue this trend into the foreseeable future until we have a major overhaul of the way we tax corporations in this country.