Home sales forecast brighter in '07
"Markets that boomed in the last five years boomed too much, and now they are coming down," Lereah says.
Prices were high, and builders responded by adding a flood of new homes to the market. When prices continued to rise, investors saw potential and bankrolled even more homes. When buyers stopped buying, the markets that flew the highest had the farthest to fall.
Molly R. Boesel, a Fannie Mae economist, wrote in a February commentary that sales will likely post another negative year in 2007, but that most of the decline is expected from a reduction in investor demand. Consumers, on the other hand, will likely jump back into the market.
The Federal Open Market Committee
of the Federal Reserve agreed when it issued
its Jan. 31 statement. In that statement, governors
said they were encouraged by "tentative
signs of stabilization" in the housing
"These are the first stages to getting the markets back into balance," Seiders says.
But even as consumers get back
in a buying mood, housing markets won't necessarily
spring back to previous heights. Part of the
reason is because there is still a large inventory
on the market, Lereah says.
One way economists rate homes
sales is by calculating how many months it would
take to sell all the homes listed for sale at
the current buying rate. At last count, Lereah
says it looked like there were between 6.8 months'
and 7 months' worth of homes sitting on the
market right now. He says that number will likely
fall to between 6.6 months' and 6.5 months'
worth by year's end. But that is still above
the 5.5- to 6-month inventory that signals a
Looking foreword, Lereah says
2007 will likely see an additional 1 percent
fall in sales -- but only compared with 2006
numbers, meaning sales will have hit bottom
and begun to rebound by year-end.
"We are not looking for a
big expansion, but it will be an expansion --
a sluggish expansion," he says.
Michael Giusti is a freelance writer
based in New Orleans.