NAR: Tighter Lending Standards Good for Housing, But Will Dampen Sales

    WASHINGTON, April 11 /PRNewswire-USNewswire/ -- Tighter lending
 criteria and fallout from the subprime loan debacle will lead to a
 healthier housing market with greater assurance that owners can handle
 mortgage adjustments, but higher loan standards will slow the housing
 recovery, according to the latest forecast by the National Association of
 Realtors(R).
     David Lereah, NAR's chief economist, said the changes are necessary for
 the long-term health of the housing market. "We want to people to be able
 to stay in their homes with mortgage terms they understand and can handle,"
 he said. "Simply stated, a loan with the lowest monthly payment probably
 isn't in your best interests -- borrowers need to understand worst-case
 scenarios. If you're in a mortgage you aren't comfortable with, now is an
 excellent time to refinance, if you can, with historically low rates on
 safer conventional loans."
     Last week, Freddie Mac reported the 30-year fixed-rate mortgage was
 6.17 percent. The 30-year fixed rate should rise slowly to 6.6 percent by
 the end of this year, so borrowers who need to refinance should act soon.
 "Tighter lending standards will dampen home sales a bit, but by less than a
 couple of percentage points from initial projections. We still forecast
 2007 to be the fourth highest year on record for existing-home sales, and
 housing remains a great long-term investment," Lereah said.
     Existing-home sales are likely to total 6.34 million in 2007 and 6.52
 million next year, in contrast with 6.48 million in 2006. New-home sales
 are seen at 904,000 this year and 935,000 in 2008, below the 1.05 million
 last year. Housing starts are estimated at 1.47 million in 2007 and 1.55
 million next year, down from 1.80 million units in 2006.
     "As home sales moderate, overall home prices will be essentially flat
 this year," Lereah said. "The good news is that inventories remain well
 below the levels experienced during the last housing downturn in the early
 1990s, and supplies are close to balance in many areas."
     The national median existing-home price will probably slip 0.7 percent
 to $220,300 in 2007, following a 1.0 percent rise last year. The median
 new-home price is projected to increase 0.4 percent to $246,200 this year,
 after gaining 1.8 percent in 2006. Modest growth is expected next year,
 with existing-home prices increasing 1.6 percent and new-home prices rising
 2.0 percent.
     "When you look at housing activity in 2007, especially during the first
 half of this year, the percentage change in median home price is being
 distorted as the composition of sales shifts geographically from high-cost
 markets to moderately priced areas, in contrast with the sales distribution
 a year earlier," Lereah said. "Within given markets, most areas can expect
 minor price gains."
     The unemployment rate should average 4.6 percent in 2007, the same as
 last year. Inflation, as measured by the Consumer Price Index, is likely to
 decline to 2.1 percent this year, compared with 3.2 percent in 2006, while
 growth in the U.S. gross domestic product is forecast at 2.3 percent in
 2007, down from 3.3 percent last year. Inflation-adjusted disposable
 personal income will probably rise 3.1 percent this year, up from a gain of
 2.6 percent in 2006.
     The National Association of Realtors(R), "The Voice for Real Estate,"
 is America's largest trade association, representing more than 1.3 million
 members involved in all aspects of the residential and commercial real
 estate industries.
     Existing-home sales for March will be released April 24; the Pending
 Home Sales Index is scheduled for May 1 and the next forecast will be May
 8.
     Information about NAR is available at http://www.realtor.org. This and
 other news releases are posted in the News Media section. Statistical data,
 tables and surveys also may be found by clicking on Research.
     REALTOR(R) is a registered collective membership mark which may be used
 only by real estate professionals who are members of the NATIONAL
 ASSOCIATION OF REALTORS(R) and subscribe to its strict Code of Ethics. Not
 all real estate agents are REALTORS(R). All REALTORS(R) are members of NAR.
 
 

SOURCE National Association of Realtors