What’s Ahead For Home Sales?

This is from one of my Lender friends.

It may be tough to see a silver lining in the real estate world right now…foreclosures do not seem like they are going to decrease any time soon and you know what that does to home prices. But there are some big time positive factors coming to play and this could mean the market will snap back a little quicker this summer then you may be lead to believe if you watch the doom and gloom news.

For starters, rates are still low and falling home prices have made the market as affordable now as it was back in 1997. Real wages continue to increase, and ultimately that is what drives people into moving up and moving out-affordability. And though many “fear” that the housing market will push us into recession the facts just don’t bear that out. Residential Housing only makes up 4.6% of the GDP. Home sales were booming in 2001 and 2002 yet the economy still slipped into a mild recession. Our industry was not enough to pull the economy out of recession, and it is not enough to pull the economy into one. Possibly more bullish then all of this though is the stock market over the last 2 months. Quietly, the Dow is up over 1000 points. And all the technical market indicators point to a rally this summer. Stocks always price out 3-6 months ahead so that bodes well for the economy.

More then anything else, the psychology of the market is keeping a lid on the market. People are afraid of what is going to happen so they are holding off on purchasing a home. A sustained stock market rally will help change the psychology of the market. As soon as the “average joe” no longer fears for the eminent collapse of America, you will see those people pulling the trigger on home sales. With great affordability and rising wages, all we need is a positive psychology and the sales will begin. And once they start, that will feed more sales. I think this summer is going to be better then we expect and with a lot less Realtors still in the business, this should make for a great year.