LAS VEGAS — The slumping housing market should turn around in 2008 or 2009, the current and former chief economists for the National Association of Realtors trade group said today during a presentation at an annual conference.

Housing markets in Arizona, California, Florida and Nevada were among the hardest hit in the country by the downturn, NAR Chief Economist Lawrence Yun said, noting that some local markets have performed well despite the national trends.

Markets such as Salt Lake City; Salem, Ore.; Allentown, Pa.; Seattle; Raleigh, N.C; Albuquerque, N.M.; Buffalo, N.Y., and San Antonio, Texas, have experienced “robust home-price appreciation,” Yun said, counter to the national trend.

He also singled out several housing markets that can be considered underpriced, among them Lexington, Ky.; Nashville; Pittsburgh; and Denver, and noted that job growth in Wichita, Kan., makes that market right for a real estate boom.

While NAR’s projection that the U.S. median existing-home price will drop about 1.7 percent this year, Yun said that drop is not alarming given the huge run-up in prices leading to that drop. The economy, while not robust, is not in a depression, he said. The association projects the median price to remain flat in 2008.

“This is a small, minor adjustment after a strong run-up in housing prices,” he said.

Some high-priced markets, such as San Francisco and New York, where home prices appear to be out of whack with typical income levels for the area, may actually be “superstar cities,” Yun said. These so-called superstar markets, he said, “can maintain, for whatever reason, that premium above the rest of the market.”

It remains to be seen whether markets like Seattle, in the shadow of tech giant Microsoft, and internationally popular Miami may also emerge in this superstar category as markets that seem to defy statistical gravity.

Also, he said that the Northeast region, which was one of the first to experience the market downturn, may be on its way out, according to housing data.

Wall Street has been coming clean about the extent of its losses related to the mess in the subprime mortgage market, he said, and that is a necessary step for the market’s turnaround. He also said that he believes talk of the “credit crunch” is overblown, as many buyers are still able to obtain mortgage financing and are moving toward more conventional types of loans.

There are still problems, he noted, with obtaining jumbo loans in high-cost markets such as California, and NAR has been lobbying to increase the dollar amount for conforming loans, which would assist some buyers who do not currently qualify for conventional loans and cannot afford jumbo loans.

The housing market in 2007 will compare to 2002 in terms of sales, though the volume of sales are expected to be about 1.9 million less this year than they were in 2005, Yun said.

This drop in sales, he said, cannot be attributed “to just purely the subprime market disappearing,” he said, and there are other factors such as buyer fear and uncertainty that also must be factored in.

John Tuccillo, a real estate consultant who served as NAR chief economist from 1987-97, said he is less optimistic about the market recovery than Yun, who estimates that things will begin to turn around next year. Tuccillo said that his expectations are for a recovery in late 2008 or possibly 2009.

“I see $100 a barrel for oil,” he said. “I see a dollar that is falling like a stone relative to other currencies. The U.S. is forced to borrow up to $400 billion a year from foreign creditors. And that adds up to a slowing economy to me; it adds up to higher interest rates.”

But, like Yun, Tuccillo said that local markets matter more than the national market to real estate professionals.

There are some key indicators that can help real estate professionals identify when their local markets are going to turn around, he said, including a drop in new listings, a drop in the days on market, and a rise in the sale price of homes relative to the listing price.

“When you begin to see the number of new listings begin to go down, that’s stage one of the recovery,” Tuccillo said.

While some are blaming Wall Street and Fannie Mae and Freddie Mac for the severity of the housing market’s problems, Tuccillo said that mortgage brokers and Realtors should also take a look in the mirror.

“How many of you are getting back with the client and taking responsibility for getting them into a bad loan,” he said. There is “moral hazard” built into the system real estate transactions, he said.

“Everybody forgot about risk. The system stinks … because at the front-end of the market, people close the loans and walk away with no responsibility and pocket their checks.” When the audience applauded, he added, “Why are you clapping? I’m including you.”

Tuccillo also discussed demographic trends for the next market cycle, and said that real estate professionals are going to need to step up their game to appeal to Generation X and Generation Y buyers. Web sites such as, if they gain more market traction, threaten to take more transactions away from Realtors, he said.

“The issue here is getting into and understanding new technologies and new channels of communication. They will become an increasing part of your life. Tinkering with your Web site is not going to do it.”

He also said, “You have to make sure that everything you do, everything your agents do, has to be about the customer and not about them.” And consumers are seeking “world-class” service, convenience and efficiency, he said.

Meanwhile, NAR announced today that its Pending Home Sales Index, a forward-looking indicator based on purchase contracts signed in September, rose 0.2 percent from August to September. The latest index is now at 85.7, up from 85.5 in August.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined in the index and the first of five consecutive record years for existing-home sales.

The PHSI in the Midwest rose 5.4 percent in September to 82.3 but is 14.4 percent below a year ago. In the South, the index increased 1.5 percent to 99.3 but is 19.7 percent lower than September 2006. The index in the West slipped 0.1 percent in September to 80.5 and is 25.6 percent below a year ago. In the Northeast, the index dropped 10.1 percent in September to 69.5 and is 23.1 percent below September 2006.


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