We have discussed the housing market forecast for 2007 some on this site, and will follow it closely as the year progresses and we move from forecast to analysis. A round table was held recently with some of the top industry prognosticators and was covered in the Sun Sentinel by Robyn A Friedman.
David Seiders, chief economist for the National Association of Home Builders: In 2004 and 2005, there was an “unsustainable housing boom,” with sales levels and price appreciation running above what he considered to be sustainable. As a result, 2006 brought an “impressive correction” that might threaten the nation’s economic expansion.
David Lereah, chief economist for the National Association of Realtors: Some economists are predicting that the housing market will get worse before it gets better, but Lereah thinks we’re pretty close to bottoming out. “That’s good news,” he said, because it means the contraction in the housing market will be shorter than it was in the previous two contractions we experienced the last 20 years.
David Berson, chief economist for Fannie Mae: The housing downturn is “close to an end; it will not continue throughout 2007.” Prices and sales will continue to decline slightly, but by mid-2007, sales will start to pick up and prices will stop declining. Real estate is highly regional. Even if prices decline in some parts of the country, growth in other areas will sustain the industry as a whole and the national economy.
The industry analysts were cautiously optimistic on the real estate market as a whole finding the bottom and recovering and some salient points were made. The real battle is that real estate is regional and local. Sure, national trends are cool to follow, but if I am trying to sell my house today in southern Florida, I am seeing a full scale meltdown. If I am in Atlanta, Georgia I am seeing a slower period but not overly concerned.
This is a very interesting dynamic to watch, on one side are the trade folks who have a vested interest in a quick recovery and are finding every positive out there. On the other side are the bubble bloggers and their cadre who are seeing every negative indicator and discussing them at various levels of volume.
I for one am trying to stay in the dangerous middle. Politically I am not impressed with the moderates, but with the real estate market of today, we are looking at a stew, not an entree.
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If I was living on the coasts,especially Florida where speculation buying severely distorted the market, I would be very nervous.
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If I was living in anywhere but the coast, I would be cautiously optimistic.
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If I was holding an ARM and my finances were not 100 percent solid, I would be very nervous.
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If I were holding a 30 yr mortgage at 7 percent or lower and not planning on moving in the next 18–24 months, I would be optimistic.
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If I was an investor and speculator specializing in foreclosures, I would be very optimistic. This is the sweet spot in the market as the low interest rates and not so scrupulous lenders got many who should be life long renters into the housing market. They most likely will return after their loans turn sour and the low end of the market will be ripe for investors to get the deals.
So there we go, my forecast for January, 2007. My only guarantee is that I will be wrong in part of my analysis and that someone will not like what I wrote.
Personally, I live in a micro market that has been suppressed by the largest employers financial woes. But as the company solidified in the last 6 months we have seen a 10 percent pop. So for me the marketplace is looking great and has even more potential in the coming year. So while I missed the big run up the last couple of years, I am seeing appreciation in the face of most others adversity.
And that is probably the most telling rule of real estate forecasting in 2007. What is accurate where I am is most likely wrong for you. So watch closely to the national trends, but at the end of the day, focus on local. As Greg Swann said over the weekend, that goes for Real Estate Pro’s that are blogging.
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