Housing recovery forecast

TAMPA, Fla. – May 8, 2008 – A top real estate economist offered shell-shocked Tampa Realtors a hint of optimism Wednesday, saying the Bay area housing market should begin to improve in the second half of the year.

Home sales and prices, which have been battered in recent months, should stabilize and then begin to rise in 2009, predicted Lawrence Yun, chief economist at the National Association of Realtors.

In an hour-long speech before 100 members of the Greater Tampa Association of Realtors, Yun acknowledged that his observations and forecasts are often optimistic. But Yun said there are several economic indicators that point to a recovery for the national and Tampa Bay area housing markets.

“The worst conditions in the Tampa market may have already passed,” Yun said. “How strong will the recovery be? I cannot really say. I think the second half of 2008 will be better. But if I look at the long-term perspective, five years from now, comfortably, one can say home prices in this region will be 20 to 30 percent higher.”

The key to the turnaround will be to get the “fence sitters” into the housing market. Those people, who have the financial means to buy a house, perpetuate the slump “not because of the fundamentals, but because of the psychology,” he said.

In his speech, Yun cited the August 2007 collapse of the subprime mortgage industry as a positive sign. While making up just 9 percent of mortgages in the United States, subprime vehicles have been involved in 53 percent of U.S. housing foreclosures, which dragged down the housing market.

Those loan products will steadily be replaced by safer Federal Housing Administration-backed loans, Yun said.

Another seemingly daunting sign – a significant decrease in new housing starts in the Tampa Bay region – is also a good sign, reducing the glut of available homes that has held down prices.

Mortgage rates are at near historic lows, business spending is strong, and corporate profits are up, all good economic signs, he said.

“There’s a change in the mood over the last couple of weeks,” Yun said. “The first three months of the year, everyone was talking about how deep the recession would be.”

Talk of a recession is linked by many consumers with the prospect of job loss, and those consumers become hesitant to make major purchases such as a home, Yun said.

“Fortunately, we’re not in a recession, or at least not yet,” he said. “I don’t think we will go into a recession.”

Gross domestic product for the first quarter of 2008, a key measure of economic performance, was “very soft, but nonetheless positive,” Yun said. He forecasts the second quarter to be “equally soft, but not negative,” with things picking up in the third and fourth quarters.

Yun’s speech was a breath of fresh air for an industry that has been particularly hard-hit in the Tampa Bay area. Local home sales have slid from 2,810 in the first three months of 2007 to 2,079 for the same period this year, according to the local Realtors’ group. Average residential prices have slipped from $280,339 to $255,485 in the same period.

Copyright (c) 2008, Tampa Tribune, Fla., Jerome R. Stockfisch. Distributed by McClatchy-Tribune Information Services.