More Info from the 2007 NVAR Economic Summit
Additional information regarding the state of the local real estate market was provided by Dr. Lawrence Yun, VP of Research, NAR as follows (interpretations mine!):
- The DC Metro area is experiencing continued positive price growth but nowhere near the double-digit, 20%-plus appreciation common from about 2002-2005.
- While the price growth has been positive, there lingers continued apprehension and lack of confidence on the part of buyers. Nationwide, the number of sales (existing homes) is down 16% from 2005 to 2007 while new home construction is down 38% over the same period; while in Virginia, existing homes sales volume is off 32% from the peak in 2005.
- One huge factor impacting the national and local home market is the job loss in the construction field. The market slow-down has resulted less demand for homes and therefore job losses in the construction trades, which has resulted in less ability to buy homes along with foreclosure of numerous homes, which has further negatively impacted both sales prices and sales activity. A bad cycle indeed.
- An interesting observation is the current (starting in 2002) disparity between household income and home prices. Up until 2002, both were rising at approximately the same rate and keeping pace with each other. After 2002, and especially notable in 2005, the ratio between home price and income levels was clearly out of sync. Home prices took an abrupt upward turn while income levels also increased but at a much more moderate rate. It is this disparity which has resulted in the difficulty for most people to purchase a home.
- Another interesting observation is the comparison of mortgage obligation to income. In the DC metro area, this percentage is hovering around 27% which is manageable by most standards, considering that other major US cities such as San Diego are closer to 45%! This is certainly partially the result of mortgage interest rates remaining near 45-year lows!
- An additional outgrowth of the housing market is the rapid rise in average monthly rent now being experinced in the area due to the simple market factors of supply and demand.
- Despite the huge publicity that accompanied the rise in foreclosures of subprime mortgages, a lesser-known fact is that the foreclosure rate for prime loans has remained relatively unchanged.
- Experts are sensing a huge pent-up demand among homebuyers as household formation (new households) has levelled off. What this means is that young adults are remaining with relatives longer or more individuals are sharing housing. Once the apprehension of the market subsides, this delayed demand should re-ignite the housing market.
- FHA loans, which offer low or no down payment along with flexible terms and higher limits, will lure buyers away from the riskier subprime loans that have caused so much of the problems the market is now experiencing.
- Market experts anticipate that 2008 will be a stronger market than 2007 with prices stabilizing and even improving due to the current pent-up demand, continued low interest rates, and a healthy but not excessive inventory of homes from which to choose.
Stay tuned!
- The DC Metro area is experiencing continued positive price growth but nowhere near the double-digit, 20%-plus appreciation common from about 2002-2005.
- While the price growth has been positive, there lingers continued apprehension and lack of confidence on the part of buyers. Nationwide, the number of sales (existing homes) is down 16% from 2005 to 2007 while new home construction is down 38% over the same period; while in Virginia, existing homes sales volume is off 32% from the peak in 2005.
- One huge factor impacting the national and local home market is the job loss in the construction field. The market slow-down has resulted less demand for homes and therefore job losses in the construction trades, which has resulted in less ability to buy homes along with foreclosure of numerous homes, which has further negatively impacted both sales prices and sales activity. A bad cycle indeed.
- An interesting observation is the current (starting in 2002) disparity between household income and home prices. Up until 2002, both were rising at approximately the same rate and keeping pace with each other. After 2002, and especially notable in 2005, the ratio between home price and income levels was clearly out of sync. Home prices took an abrupt upward turn while income levels also increased but at a much more moderate rate. It is this disparity which has resulted in the difficulty for most people to purchase a home.
- Another interesting observation is the comparison of mortgage obligation to income. In the DC metro area, this percentage is hovering around 27% which is manageable by most standards, considering that other major US cities such as San Diego are closer to 45%! This is certainly partially the result of mortgage interest rates remaining near 45-year lows!
- An additional outgrowth of the housing market is the rapid rise in average monthly rent now being experinced in the area due to the simple market factors of supply and demand.
- Despite the huge publicity that accompanied the rise in foreclosures of subprime mortgages, a lesser-known fact is that the foreclosure rate for prime loans has remained relatively unchanged.
- Experts are sensing a huge pent-up demand among homebuyers as household formation (new households) has levelled off. What this means is that young adults are remaining with relatives longer or more individuals are sharing housing. Once the apprehension of the market subsides, this delayed demand should re-ignite the housing market.
- FHA loans, which offer low or no down payment along with flexible terms and higher limits, will lure buyers away from the riskier subprime loans that have caused so much of the problems the market is now experiencing.
- Market experts anticipate that 2008 will be a stronger market than 2007 with prices stabilizing and even improving due to the current pent-up demand, continued low interest rates, and a healthy but not excessive inventory of homes from which to choose.
Stay tuned!
posted by Bob Clark at
12:21 PM
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