The National Association of Realtors [NAR] lowered its 2007 housing forecast Tuesday: Existing home sales should fall 2.9% to 6.29 million units -- lower than the 2.2% outgoing chief NAR economist David Lereah previously forecast -- and then rise to 6.49 million in 2008. New homes sales will now decline 18%, not 14%, to 864,000 from 2006's 1.05 million, but rise to 936,000 in 2008. Housing starts will fall 20% from 1.80 million in 2006 to 1.46 million in 2007, then rise to 1.52 million in 2008. Blaming speculator shakeouts and tighter lending standards after the subprime mortgage crisis, NAR economist Lawrence Yun indicated national median home prices would decline for the first time in 29 years. Existing home prices will slide 1% to $219,800 with a 1.4% pickup in 2008. New home prices will stay flat at $246,400, rising 2.2% in 2008. Separately, real estate broker ZipRealty said homes-for-sale inventory rose 7% in 18 major cities, vs. the typical 4.5% rise for the strong spring market since 1985. Yun cited low unemployment rates, GDP growth, lower inflation and higher income statistics, saying "If it weren't for a favorable economic backdrop, housing would probably have a hard landing." Despite the gloom, some cities like Seattle, Portland, Houston, Austin and Charlotte are experiencing robust price appreciation. These cities sat out the boom, and are now suffering less from the bust. Prices are rising but still reasonable, as homeowners escape the pricier markets.
Sources: NAR Press Release, Wall St. Journal I, II, III, MarketWatch, CNBC, Pacific Business News, Chicago Tribune
Commentary: PIMCO: We're in the Middle of Housing Downturn • Housing Bubble and Real Estate Market Tracker • 2006 Second Home Sales Decline: Doesn't Surprise NAR Economist • Consumer Slowdown? Retail Conference Calls Say Not Yet
Stocks/ETFs to watch: D.R. Horton (NYSE:DHI), Centex (CTX), Lennar (NYSE:LEN), Pulte Homes (NYSE:PHM), Toll Bros. (NYSE:TOL). ETFs: iShares Dow Jones U.S. Home Construction (NYSEARCA:ITB), SPDR Homebuilders (NYSEARCA:XHB), PowerShares Dynamic Building & Construction (NYSEARCA:PKB)
Related: All Real Estate Is Local, by David Lereah
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