I spent three hours last week listening to Lawrence Yun speak at the Housing Summit put on by the local real estate board. He is the Chief Economist for the National Association of Realtors. This will by a synopsis of what I 
believe Mr. Yun said about the housing economy.
The past two years have shown weak growth in the economy. Although there has been population growth there has been no housing demand growth. Builders incomes have dropped 70-90% and have been constrained by the lack of construction loans. Yun stated that is possible that in 2-3 years there will be a housing shortage due to the lack of new construction. He did state that housing starts are stable; but at a very low level.
According to Yun economists think that the recession ended last summer as we as a nation are beginning to produce more goods. The first signs of new jobs being created are out there. It will likely take more than 4 years to regain the 8 million jobs lost and from 6-8 years for us to recover from this recession. With the over-correction that took place on housing prices it has created a negative psychology among the people. He stated that this over-correction needs to be halted so the collateral damage of negative emotions is stopped. Only then will people begin to jump back into the market. As a rule, people don’t buy homes with cash. Rock bottom interest rates along with rock bottom pricing indicates an over-correction. The economic trenders, Case-Shiller data shows that we are currently at the zero line having returned to ‘normal circumstances’ regarding home
prices and the ability to buy homes by those that live in the area.
Medford has had 10 straight years of job losses while Washington DC has had the same number of years of job growth….likely driven by government jobs he said. He stated that to keep foreign investors confident in our growth we need to have a credible plan to reduce the debt. If they lose their belief in us, rates will likely rise to between 7-9%. The government is trying to chip away at some of our tax deductions for home ownership such as mortgage interest and property tax deductions and having a capital gains tax for all sales. The National Association of Realtors are fighting these on your behalf. It is a proven fact that homeowners perform better in social
standards such as test scores,, juvenile delinquency and other standards. Artificially boosting the ability to be a homeowner is what created the housing bubble that eventually sunk the economy. Yun predicts that the mortgage rates will rise to approximately 6% at about this time next year.
The commercial real estate market follows the housing market by 12-18 months. This market is following the same bubble even though the bubble was not driven by sub-prime loans. At this time since the loans are not government backed the now-profitable banks don’t want to let go of the money for commercial loans. Look for foreclosures and great prices on commercial sales and leases in the next few years. Fannie Mae has played a huge roll in keeping the interest rate low on home loans. They created a hedge fund that bet on the rise of the housing market which increased their profits. When the housing market crashed, the public took the hit.
NAR is advocating in Washington DC that Fannie Mae would never be allowed to do this again. Take the profits and ask the public to pay for them.
To sum it up Yun said that the increase in stock market activity was indicative of economic action by the wealthy where economists watching the housing market to take the pulse of the middle class. He was cautiously hopeful although the going is much slower than normal in a recovery. Be on the watch for political moves that take away the tax credits for homeowners.
Let me know if I can help you buy or sell your home….I am in it for the long haul!
About Jan Garcia
