DENVER Expect higher mortgage rates, relatively flat home prices and a rebound in home sales next year, Lawrence Yun, chief economist for the National Association of Realtors, told an audience of Denver real estate professionals.
Yun predicts home sales will return to more normal levels seen before the housing bubble even without federal homebuyer tax credits, which ended in April.
A key test will be the winter months this year, Yun said Wednesday.
If home sales this winter can match prebubble years like 2000 and 2001, then spring sales likely will keep the momentum going.
Yun expects U.S. home sales to reach 5.2 million next year, up from 4.8 million this year and matching the pace seen in 2000.
The addition of 1.5 million jobs next year, compared to 1 million this year, should help fuel the uptick in sales.
I think we are entering a virtuous cycle, Yun said.
But economists like David Rosenberg at Gluskin-Sheff disagree, citing a high shadow inventory of foreclosures coming onto the market, weak buyer confidence and homeownership rates still above prebubble levels.
The housing market cant get out of its own way, Rosenberg recently wrote.
Yun said recovery would lead to a drop in foreclosures, which have been about 2 million a year the last two years versus 400,000 a year in previous periods.
Affordability also is in the markets favor. The monthly mortgage payment on the median-priced metro Denver home now is $257 less than it was in the second quarter of 2005, Yun said.
Tighter underwriting standards have resulted in fewer new loans going bad, making 2010 the best vintage for mortgages ever at the Federal Housing Administration, Yun said.
That strong performance might encourage lenders to loosen up a little more and qualify potential buyers now blocked out of the market.
His forecast calls for mortgage rates, which briefly approached 4 percent, to return to 5 percent next year and 5.9 percent in 2012 as inflationary pressures build in the economy.