NAR Research Update -- April 2008

The Latest Pending Sales Index and Forecast Release
Little change is expected in existing-home sales over the next few months, before improving notably during the second half of the year, according to the latest forecast. Lawrence Yun, NAR chief economist, said the market will come into clearer focus this summer. “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said. “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”
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Investment and Vacation Homes – Still Desirable
NAR’s annual Investment and Vacation Home Buyers Survey shows that the combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33 percent of all existing- and new-home sales, which is close to historic norms. The market share of homes purchased for investment last year was 21 percent, down from 22 percent in 2006, while another 12 percent were vacation homes, compared with a 14 percent market share in 2006. The total share of second homes declined from 36 percent of transactions in 2006. Lawrence Yun, NAR chief economist, said the findings suggest different cycles for each of the sectors over the past two years. “Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007,” he said. Read the story>

State Mortgage Conditions
Ca1 Ca2 Ca3 Ca4 Research is working to bring NAR members more information that is locally relevant. We’ve just released three new projects that focus on state and local markets. The first of these is the State Mortgage Conditions report - with 32% of homeowners nationwide owning a debt-free home, subprime exposure is decreasing. The report presents the current level of subprime exposure and its impact upon foreclosure activity in your state. Read the Commentary>

Metro Area Wealth Gain
Wealthgain1 Wealthgain2 Wealthgain3 How has the wealth of current homeowners changed as a result of home ownership? One way to answer that question is to create a snapshot of the equity individuals who purchased a home at the median price 5, 10, 15, and 20 years ago would have built up if they had kept that home through 2007. We did that for 154 metropolitan statistical areas (MSAs), and the findings yield some expected and unexpected results. Find out how San Francisco Bay Area is doing.

Inflation: Who Wins, Who Loses?
Inflation is a stealth tax.  You have less purchasing power when it is high. However, if someone is paying higher prices, then someone on the other side must be receiving higher revenues.   Many salary adjustments are based on the consumer price index, and entrepreneurs and businesses receive higher revenue.  Mentally, though, people believe the rise in income is from hard work while the rise in consumer prices just eats into that hard-earned income.  Therefore, inflation is awful.

Economists do not like inflation for other reasons.  Large movements in prices distort price signals and lead to less efficient allocation of resources.  Lower productivity growth holds back the country's economic potential and standard of living.   As a matter of fact, today's(4/10) front page story in the Wall Street Journal is entitled:  "Inflation, Spanning Globe, is Set to Reach Decade High."  Related to the real estate sector, inflation produces distinct winners and losers.
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