Real Estate Picture: Gloom or Boom?

Up or down? ��Housing industry experts are reading the tea leaves.

Where will the housing market go, up or down? ��That depends on whom you ask. ��Real estate and mortgage finance experts are making mostly upbeat predictions for 2001. ��Buoyed by recent reductions in interest rates, they say home sales should remain relatively strong and prices should continue to rise. ��Homebuilders, on the other hand, are not as optimistic and point to a slowing economy and new hesitancy in April among buyers of new homes.

All of the major housing indicators are expected to increase this year, according to Dr. David Lereah, chief economist for the National Association of Realtors ��. ��Certainly, homebuyers can't argue with low interest rates. ��Lereah expects the 30-year fixed mortgage interest rate to average 6.9 percent this year, down from 8.1 percent in 2000. "With interest rates near 30-year lows and historically low unemployment, we now expect both new and existing-home sales, along with housing construction, to increase during 2001," he said. "In other words, people with good jobs are looking at very good housing affordability conditions in most of the country?Ķ"

For the first time in April, however, homebuilders are noticing that enthusiasm among home purchasers and builders is starting to diminish. The National Association of Home Builders' index of expected sales of new homes over the next six months decreased from 67 in March to 63 in April. ��An index of current sales fell from 66 to 62. "While significant strength remains in the overall housing market, builders are perceiving a bit more hesitancy among potential buyers," said Bruce Smith, president of NAHB and a builder from Walnut Creek, Calif. "People are out there looking, but some are less likely to commit in the face of current economic conditions," he said.

David W. Berson, Fannie Mae's Economic Chief, is guardedly optimistic but still predicts home sales to drop. ��Fannie Mae is one of the major secondary mortgage loan companies in the United States. ��"If the economy can escape recession in the first half of the year and economic activity picks up some in the second half of 2001, then home sales should drop only modestly from last year's near-record levels," says Berson. ��"We now anticipate that sales will decline only by about 6-7 percent this year, and even this may overstate the falloff given recent data." ��If you're a homebuyer, don't expect too much relief from spiraling home prices coming from Berson. ��"Home price gains also should slow this year, but with demand remaining at high levels and supply relatively subdued, average price increases are projected at 4.5-5.0 percent (down from last year's rapid pace, but still strong historically)."

The picture for homebuyers and sellers is going to vary from region to region. ��In Dallas-Fort Worth, for example, existing home sales fell by 6 percent in February compared with February 2000, the second sales decline in three months. ��Local real estate agents say that trend reflects consumer uncertainty about the economy. ��Prices are still higher than last year, despite the slowdown. ��In February, the median price of homes sold in the Dallas-Fort Worth area was $127,800 - up 8 percent from a year earlier.

Sources used to create this article include Fannie Mae, National Association of Realtors ��, and the Dallas Morning News.