Sales have picked up during the first half of 2015, but a lack of new housing supply may slow sales moving forward Home sales are expected to finish 2015 at their highest pace since 2006, but quickly rising prices and mortgage rates may potentially slow sales, according to an economic forecast forum at the recent 2015 Realtors Legislative Meetings and Trade Expo.
In the forum, Lawrence Yun, chief economist of the National Association of Realtors, presented his midyear economic and housing forecast while Robert Dietz, vice president of tax and market analysis at the National Association of Home Builders, shared the building industry’s perspective on the housing market.
Existing home sales are higher than last year, and sales strengthened in March because more buyers entered the market as the spring buying season got underway, said Yun. The main factors driving home sales are job growth and interest rates below 4 percent, resulting in regions with strong job gains and economic activity — particularly in states like Utah and Florida and cities like Denver — outpacing the rest of the nation in terms of demand, added Yun.
Yun and Dietz both focused on housing supply in the forum. Yun said new-home construction continues to underperform and is hindering housing sales from being higher. Increasing demand on limited supply leads to unhealthy price growth and negatively affects affordability, Yun added.
Dietz does not expect building activity to return to “normal” levels till 2017, pointing to NAHB data on townhome construction as an indicator to watch. “A gradual uptick in the building of townhomes would lead me to believe that young buyer demand is finally on the rise,” Dietz said.
Yun forecasts housing supply to be below 1.5 million new starts — the number needed to meet demand — for time being, with 1.1 million in 2015 and 1.4 million in 2016. On top of that, he expects interest rates will rise, with the Federal Reserve increasing short-term rates in September and mortgage interest rates moving upward over the next year.
“The impact of rising rates on affordability will greatly depend on two things: housing supply keeping up with demand and the strong pace of job creation eventually leading to meaningful wage gains,” added Yun.
— Yuhee Woo
© CTW Features