8.6% Drop Expected in Home Sales in 2007
The National Association of Realtors (hereafter referred to as NAR)released preliminary data today from its Senior Economist, Lawrence Yun, that the sale of homes nationwide would be down approximately 8.6% in 2007. This would amount to 5.9 million homes sold in 2007 compared to 6.5 million sold last year. On the bright side, the NAR expects home sales to climb to 6.3 million next year, a slight rebound but still lower than sales in 2006. The 5.9 million homes expected to be sold in 2007 is the lowest the housing market has seen since 2002 when approximately 5.6 million homes were sold.
While the fears of subprime mortgages are still a concern, there has been a reduction in the number of new homes being constructed and therefore not as much pressure is being added to the current inventory levels by builders. If the foreclosure rate increases unexpectedly, or more than expected I should say, the inventory levels could go higher and cause further price deteoration and a lingering stagnation (or glut) of properties on the market. Such a spike in foreclosures could reduce the number of units sold in 2008 and further drive down the average sale price as well. It remains to be seen how much the subprime mortgage market and the foreclosure rate will affect the market but it is something being closely watched by investors in the US and abroad.
Investors (both of real estate investment and those investing in securities) as well as homeowners, real estate practioners, and so forth would be wise to take note of the following dates when real estate industry data is released:
The 16th of every month: Number of housing starts and building permits (data released by the US Commerce Department).
Last business day of every month at approximately 10:00am EST: New Home Sales for the month prior (data released by the US Commerce Department)
Around the 25th of every month: Existing home sales for the prior month (data released by the National Association of Realtors)
All of the above economic data can be found by going through financial websites, newspapers, etc. For example, you can go to Yahoo! Finance and click on Economic Calendar and see a list of economic data being released on any given date and time. A brief explanation of the data can be found by then clicking on the name of the item once you are in the economic calendar.
Some statistics in this article were derived from a Yahoo! news story published online on September 11, 2007 by Alan Zibel, an AP Business Writer. The Yahoo! story was entitled “Realtors Predict Drop in 2007 Home Sales“