Things Are Looking Up: 2010 Economic Forecast

A large crowd of REALTORS®, many with coffee cups in hand, snapping photos with iPhones and Blackberries, packed a ball room this morning to hear NAR Chief Economist Lawrence Yun discuss housing market trends and the economic outlook.

Yun kicked off his presentation by telling the capacity crowd that things are looking up with the recent extension and expansion of the home buyer tax credit and home prices beginning to stabilize. While the U.S. economy still faces some significant challenges, including high unemployment, Yun says there are a number of reasons for REALTORS® to feel optimistic about 2010: “The momentum is building. . .”

According to Yun, the tax credit has already delivered a significant boost to the economy, bringing 350,000 to 400,000 buyers to the housing market so far. The extended and expanded home buyer tax credit will help to release pent-up demand, bringing more buyers–including move-up buyers–into the market and increasing market velocity. Yun estimates that in 2010, thanks to the credit and home price stabilization, home sales should increase by 15%–an estimate that he was careful to explain is extremely conservative. Home values, which Yun stressed are key to durable economic recovery, will begin to become positive in 2010.

To check out NAR’s Economic Forecast or the slide show presentation, visit NAR Research’s home page.

2010: A Major Test for Commercial

By Brian Summerfield, Online Editor, REALTOR® Magazine

The next year or two may be a “test of survival” for anyone in the commercial real estate sector, but the upswing could be very lucrative for the ones who make it through that period. This was the overarching message coming from panelists and speakers at the Urban Land Institute’s Fall 2009 meeting in San Francisco last week, as well as ULI’s Emerging Trends in Real Estate 2010 report, which was released at the event.

Right now, the consensus among industry experts seems to be forming around a slower, “L-shaped” recovery in the commercial market, with employment repeatedly being cited as a key factor in determining exactly when that recovery may come. The discussion was well-timed, seeing as how the U.S. unemployment rate topped 10 percent last month, reaching levels we haven’t seen in a quarter century. Predictions as to when we’d see real job creation again ranged from late 2010 to 2012. Read more

The Tax Credit Vs. Cash for Clunkers

By Brian Summerfield, Online Editor, REALTOR® Magazine

Amid several news reports that the first-time home buyer tax credit will almost certainly be extended, I’ve seen more than a few blogs and online comments arguing against it. Some of them say the government can’t afford it, and lament the fact that we’re borrowing from our children and grandchildren to pay for this. Others maintain that the tax credit artificially stimulates demand, and the market will resume its slump whenever it does expire. Still others claim that it hasn’t really motivated enough buyers who would not have otherwise purchased a home to justify the program.

I may disagree with some of these arguments, but I’m glad people are making them. It’s essential that we have a healthy debate on this important subject rather than move forward with our eyes closed and our mouths shut.

However, there is one argument that I take issue with: The tax credit and the “Cash for Clunkers” program are essentially the same thing. I’ve read this line of reasoning in a few places, and in each instance, it seems to confuse rather than clarify. It seems to me that the two initiatives are very different in a few significant ways: Read more

Jumbo Freeze Might be Thawing

By Robert Freedman, senior editor, REALTOR® Magazine
It’s still early but there are signs the availability of jumbo financing might be improving—although underwriting standards probably won’t ease any time soon. That means the days of creditworthy borrowers having a tough time getting financing for an amount over the conforming loan limit might be ending but they’ll still have to come up with a significant down payment and be prepared to show lots of documentation, like three years worth of tax returns instead of the customary two.

NAR Chief Economist Lawrence Yun says lenders are slowly getting back into the game because the climate of dread is lifting: Wall Street analysts and business executives have recalibrated their performance scenarios to reflect the greatly improved conditions among lower-priced homes (thanks to the home buyer tax credit and steeply discounted pricing). That in turn is creating a virtuous cycle as the improved scenarios help relax concerns over the economy, pushing up equities, which in turn creates the wealth that further increases confidence.
Read more

Mental Recession Redux?

By Brian Summerfield, Online Editor, REALTOR® Magazine

In July 2008, in the heat of the presidential election, McCain campaign advisor and former U.S. Senator Phil Gramm caused some controversy when he seemingly characterized the United States as “a nation of whiners” who were plagued by a “mental recession.” In other words, the economic problems of the time were all in people’s minds.

Events since then would appear to controvert Gramm’s argument. The economic troubles manifesting themselves at the time—including considerable overleveraging among major banks, increasing unemployment, and rising mortgage defaults—were not just figments of our collective imaginations.

However, in spite of his flawed analysis, Gramm may have been on to something with his concept of a mental recession. In fact, we may be heading into one right now. Read more

New-Growth Indicators: What Do You Look for?

By Mariwyn Evans, Commercial Editor, REALTOR® Magazine

If you think you have a good nose for where the next new area of development or redevelopment will be in your market, we want to hear from you. Contact Mariwyn Evans at mevans@realtors.org by Sept. 25. Also, take our poll on good signs of future growth in an area.

The Week in Quotes

By Brian Summerfield, Online Editor, REALTOR® Magazine

With the nation’s focus on rising unemployment, an uncertain economic recovery, and health care reform, here are some of the more salient quotes from leading figures this week:

“It is hard to escape the conclusion that the Fed may need to maintain fairly low interest rates over a period of many years … If you want to bring down leverage, you should keep monetary policy sufficiently accommodative to forestall a collapse in spending and a deflationary spiral.”

- Goldman Sachs economists Peter Berezin and Alex Kelston, commenting in a report released this week Read more

Questions About Health Care Reform

By Brian Summerfield, Online Editor, REALTOR® Magazine

As many of you have probably heard, Whole Foods CEO John Mackey recently caught some flak for writing an op-ed piece in the Wall Street Journal opposing any new health care entitlements on the grounds that they would have to be financed with major deficit spending.

Mackey’s article sparked a wave of outrage among political progressives, many of them Whole Foods customers. His arguments even instigated an organized boycott of the grocer that currently numbers in the tens of thousands. This is just one instance that demonstrates how high emotions run in this debate, and some claim the intense passions we’re seeing expressed on both sides of the political spectrum are about more than just health care.

Is that true? In a sense, yes. Emotions aside, the health care debate boils down to distinct philosophies concerning the proper role of government and the private sector, as well as conceptions of rights. Read more

A Proposed Reboot for Fannie and Freddie

By Brian Summerfield, Online Editor, REALTOR® Magazine

A proposal to take Freddie Mac and Fannie Mae’s bad assets off the books and restructure the two organizations is scheduled for discussion at the White House’s National Economic Council today. A central part of the plan is the creation of a permanent, government-supported “bad bank” that would always be there to back up Fannie and Freddie by absorbing any toxic debts. (This idea originated with James Lockhart III, the chief regulator of the two companies and head of the Federal Housing Finance Agency, who recently announced that he’ll be stepping down from that role at the end of this month.)

Proponents of the move say this would shore up the organizations and get them funding mortgage loans again, which they haven’t been doing much of since their near-collapse in the summer of 2008. (The Federal Housing Authority has stepped up to fill some of the vacuum left by this breakdown in the mortgage lending system.) By reducing both bad assets and risk, Fannie and Freddie would be in a position to resume their roles as the prime movers of the mortgage market, which would in turn boost the housing sector and, ostensibly, the entire economy.

However, there are potential problems with the plan. Read more

Connecting Joblessness to Houselessness

By Brian Summerfield, Online Editor, REALTOR® Magazine

Although it isn’t difficult to establish a connection between rising unemployment and the crisis in the housing market, I haven’t come across many things that demonstrate this relationship more starkly than a multimedia map developed by TIP Strategies Inc., an economic development consultancy.

Without even really trying, this map demonstrates the alignment between the precipitous loss of jobs in the United States, and the collapse of housing prices and spike in foreclosures in certain areas. Read more

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