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.

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

Have We Learned Anything From the Financial Crisis?

If you agree that the country hasn’t yet learned its lesson from the financial meltdown of 2008, you’ll want to take a look at a piece in Sunday’s New York Times by Sandy B. Lewis and William D. Cohan.

“The Economy Is Still at the Brink” alternately takes to task President Barack Obama and Congress (stop with the short-term fixes, and start imposing some real reforms on the banking system), U.S. consumers (stop spending money you don’t have), the securities industry (let’s have some real transparency in the area of asset-backed securities), and Wall Street executives (when are they going to publicly admit their role in the financial crisis?). Read more

What’s the Shape of Our Recession?

By Brian Summerfield, Online Editor, REALTOR® Magazine

One of the interesting things about this economic downturn has been the debate among serious thinkers about what letter of the alphabet it would most resemble when mapped on a chart. For those of you who haven’t been keeping track, here are the four current challengers:

• The V-Shaped Recession: The best possible scenario right now, the “V” recession would be characterized by a short economic bottoming out, followed by a sharp upturn.
• The U-Shaped Recession: This would be tougher, but still manageable. The difference between “U” and “V” recoveries is that the former has a longer period of economic stagnation and a slower recovery.
• The W-Shaped Recession: In this scenario, businesses and consumers are tantalized with a budding resurgence, but the economy collapses again before it truly improves for the long term.
• The L-Shaped Recession: This would be the worst of all of these options. An “L” recession means that following a drop, the economy essentially would not grow significantly for a sustained period. Read more