Most housing markets experiencing slowdowns aren’t facing fundamental economic problems like job losses and out migration and will see prices correct, rather than collapse, in 2007.
Barring an unforeseen jolt to consumer confidence or a sudden rise in interest rates, the volume of home sales nationwide in 2007 will be similar to or slightly below 2006 levels. In order for this to happen, prices will have to come down in areas that saw rapid appreciation during the boom years.
A “good solid price correction will bring buyers back into the market.” said Lereah, National Association of Realtors economist.
Don’t expect mortgage rates to go up or down more than 1/2 % in the year ahead because of “a huge flood of Global capital looking for places to invest.
“Sales activity may hold up pretty well, but I think we should prepare for a long extended period” with little price appreciation, Sklarz, head of global research for New City Technology said.
Boom markets headed for a prolonged correction include regions on both coasts that saw rapid price appreciation, plus Las Vegas and Phoenix, Lereah said.
“Job growth is steady, we have low unemployment at 4.4 percent nationwide, and stable, long-term interest rates. These are all solid indicators holding up the economy.”
In areas of south Florida where prices rose rapidly during the boom, there’s a large supply of inventory, especially condos, Lereah said. Rising insurance costs in the state’s coastal areas are prompting others to put their homes up for sale.
Baby boomers looking to retire to a sunny climate will begin settling in northern Florida, which is viewed as less risky to natural disasters and price swings.
Some baby boomers are choosing to leave the Sunshine State behind — although it’s taking them awhile to unload their homes, and they’re not getting what they used to for them.
A Raleigh, N.C., broker saidthere has been a “trickle down” effect among buyers relocating to the area from Florida. The homes they leave behind stay on the market longer, and they show up in North Carolina with less cash, the broker said.
Such buyers are nicknamed “half backs” — people who moved to Florida from the Northeast and now want to move halfway back, stopping in places like the Smoky Mountains and North Carolina.
Drawn by rising property values in their own countries and a weakening of the dollar, foreign investors from Latin America and Europe continue to buy property in Florida, Lereah said. Some 15 percent of homes sold in Florida are purchased by non-U.S. residents, he said.