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Real Estate Guide 2007
2007 overview
The real estate market was bed-ridden last year but 2007 brings new hope the market will get back on its feet.
2007 Overview
Home sales forecast brighter in '07
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"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 market.

"These are the first stages to getting the markets back into balance," Seiders says.

Stifling inventory

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 balanced market.

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.

-- Posted: March 8, 2007
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