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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, November 16, 2008 Desperate for a rebound, realtors pitch a plan By Tom Kelly ORLANDO, Fla. -- The motivational speakers included legendary cyclist Lance Armstrong. Two-time Olympic beach volleyball champs Kerri Walsh and Misty May-Treanor were on hand to autograph pictures. The feel-good giveaways were cuddly toy horses, monkeys and bears. You could even get a cashmere scarf for $10. Despite the attempts to totally energize and comfort attendees at the National Association of Realtors annual convention (its theme was "Destination: Success -- Full Speed Ahead"), the lousy economy and national housing numbers brought a sobering reality. New and existing home sales have combined to drop more than one million units a year since their peak in 2005 with prices slumping more than 20 percent during that time. Services available at the Realtors' Expo included a Certified Depressed Property Agent designation plus several subscriptions to foreclosed properties. Educational sessions offered material on appraising homes in declining markets plus a 90-minute "Market Survival Guide." Where's the bottom? Nobody seems confident in a prediction although Lawrence Yun, the Realtors group's chief economist who predicted at this meeting last year that the turnaround would begin in late 2008, tried to throw his 1.2 million-member trade group a bone by showing that pending home sales slipped 4.6 percent nationwide in September from August but remained 1.6 percent higher than a year earlier. He also stated that some of the areas hardest hit by the slowdown, including Florida and California, showed "consistent, solid gains" and that NAR's housing affordability index is averaging 19 percentage points higher this year than in 2007. But today's sales are not like those of the past. Based on a recent Realtors association survey, 35 percent to 40 percent of all recent home sales across the country were "distress sales," such as bank-owned foreclosures or "short" sales in which the lender agrees to take less than the amount owed. In Florida, distress sales could be as high as 50 percent or 60 percent of all recent closings. "The depth of the recession will be dependent upon whether we have a housing market recovery," Yun said. "If we have a housing market recovery, that will begin to get the economy going. If we do not, we may be seeing a recessionary condition we have not seen for 30 years." The Realtors association recently presented Congress with a Four-Point Housing Stimulus Plan to help stabilize the housing and mortgage markets. The package suggests using $130 billion of the $700 federal billion bailout funds on housing, specifically earmarked for an interest-rate buydown and more tax credits. The features include: A 1-percentage point, interest-rate buydown on fixed-rate loans for all buyers. The reduction reportedly would result in approximately 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at a nearly 10-month supply would decrease to approximately a 7-month supply. The buydown offer would be available for a specific time period. Elimination of repayment of the tax credit for first-time home buyers and expansion of the credit to all home buyers. The $7,500 must be repaid over 15 years. Making the 2008 increased mortgage loan limits permanent. Halting federal bailout funds to banks with no strings attached. Permanently banning banks from entering into real estate brokerage or development. The association predicts the 30-year fixed-rate mortgage should average 6.2 percent in the fourth quarter, rise gradually to 6.5 percent during the second half of 2009 and then average 6.7 percent in 2010. The unemployment rate is expected to be 6.4 percent in the fourth quarter and then average 7 percent in 2009. According to Realtors association, existing home sales are expected to total 5.02 million in 2008, rising to 5.32 million next year and 5.62 million in 2010. For all of 2008, home prices will have fallen by more than 20 percent in Las Vegas; Phoenix, Ariz., and many California and Florida markets, while many markets in middle America will experience little change. Wide variations in home price movements will continue in 2009. On the new-home front, the association predicts that sales are likely to total approximately 487,000 this year and 413,000 in 2009 before rising to 520,000 in 2010. Housing starts, including multifamily units, will probably total 936,000 units in 2008 and 781,000 next year, and then increase to 886,000 in 2010 Other economists tend to concur regarding the upward move in rates. "I don't think there is any way we can avoid higher interest rates, especially higher mortgage rates," said John Tuccillo, a highly regarded housing consultant and former Realtors association economist. "The federalization of Fannie and Freddie will shrink the secondary market and make it harder to get a mortgage. That said, I think the approach being taken by the president-elect has the potential for righting the economy. If the economy heals, watch real estate come surging back." Ted Jones, chief economist for Stewart Title, said not only will rates rise but he is also concerned that "pent-up sellers" will re-enter and flood the market once sales activity improves. "There are a lot of people who would put their home on the market if they felt they could sell it," Jones said. "We just don't know exactly how many of them are out there. When they do plan to sell it will add to our inventories. So, we may run into a false bottom before we find the real one." A housing false bottom will not help the economy. How slow is it? One Orlando upper-end hotel was offering guests a four-day, three–night package for $99 if they returned within the next 18 months. No blackout dates apply. Next week: International business possibilities shine a bright light for agents. Tom Kelly's book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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