Lawrence Yun, Chief Economist of the National Association of REALTORS, discusses the market in the latest issue of REALTOR Magazine.  Mr. Yun notes that for the first half of this year home sales will improve by more than 20 percent over the same period of 2009.  That means we could see a sales pace of more than 5.7 million by June, as much welcomed improvement from the last few years.

The home buyer tax credit is playing a big role in that gain.  By the time it expires in June 2010, I expect that some 4.4 million households will have taken advantage of the credit.  With those improved sales, inventories will tighten, prices will firm up, confidence will increase, and household spending will rise solidifying a housing-led recovery.

Of course, the broader economy must cooperate for us to reach that goal.  Fortunately, signs are pointing in the right direction.  At the end of 2009, long term mortgage rates were at a historically low 4.8 percent.  While they’ll surely increase in 2010, it is unlikely they’ll rise to more than a still-low 5.8 percent.  Even unemployment, the bleakest part of the economic picture, is showing improvements.  Employers reported about 11,000 job losses at the end of November, the smallest tally in a long time. 

The economy’s downside continues to be the huge federal deficit.  As the economy grows, income to the government will increase and the deficit as a percentage of the budget will improve.  Therefore, policies should be focused first on growing the econ0my.  Still, there will be pressure on the government to come up with a credible plan for paring the deficit down even more, including through tax increases.  It would be a mistake, though, for the government to look for a quick fix on the backs of home owners.

Policies that promote responsible home ownership, like the mortgage interest deduction, property tax deductions, and the capital gains exclusion on the primary residences, provide incalculable social benefits.   This is not the time to lose sight of the stabilizing influence of home ownership on communities.

This message was taken from Mr. Yun’s message on page 10 of REALTOR Magazine.  February, 2010 issue.

This entry was posted on Friday, February 5th, 2010 at 6:13 pm and is filed under Market Trends.