Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), presented his 2017 midyear forecast during a residential real estate forum at the 2017 REALTORS Legislative Meetings & Trade Expo recently. Other presenters included Jonathan Spader, senior research associate at the Joint Center for Housing Studies at Harvard University, and Mark Calabria, chief economist and assistant to Vice President Mike Pence.
Spader focused on past and projected movements in the homeownership rate, and Calabria spoke about why reversing weak productivity and the low labor force participation rate are both necessary in order to boost the economy.
The first quarter represented the most successful quarterly existing-home sales pace in 10 years (5.62 million), and Yun said he expects existing-home sales activity to continue on this path and end the year at around 5.64 million, which is the best since 2006 (6.47 million) and 3.5 percent above 2016.
“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” says Yun. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”
Although existing-home sales are currently at a decade-high level, Yun said the healthy job market should be generating even more sales activity. Yun also expressed that listings in the lower- and mid-market price ranges are limited and selling quickly, and some potential homebuyers are realizing they can afford less of what’s on the market based on their income.
“We have been under the 50-year average of single-family housing starts for 10 years now,” said Yun. “Limited lots, labor shortages, tight construction lending and higher lumber costs are impeding the building industry’s ability to produce more single-family homes. There’s little doubt first-time buyer participation would improve and the homeownership rate would rise if there was simply more inventory.”
Housing construction has been uneven so far this year, but Yun does anticipate starts to jump 8.4 percent to 1.27 million. However, this is still under the 1.5 million new homes needed to make up for the insufficient building in recent years. New single-family home sales are likely to total 620,000 this year, up 8.4 percent from 2016.