Despite cries from Wall Street that the mortgage market is in danger of collapsing, Northern Virginias regional housing activity is predicted to grow stronger, as we near the second half of 2007, according to Lawrence Yun, Senior Research Forecaster for the National Association of Realtors (NAR).
Newly released data and economic studies point to a year of greater stability amid managed growth for northern Virginias real estate market for 2007.
Other data reported by David Lereah, Chief Economist for the NAR, looks back at 2006 as a year of contraction in the housing market, but looks forward to 2007 as a year of stability, with buyers in the drivers seat. With investors and speculators now a lagging indicator in northern Virginias home sales market, settled sales prices are adjusting to empower buyers, as the affordability crisis our region has suffered over the past several years comes into balance. 2007 proposes to be the year of the buyer.
Lereah acknowledges the volume of existing home sales was down in 2006 by about 8.2 percent from a year earlier, with new home sales the weakest indicator down 17.4 percent over the previous year. Likewise, new housing starts are down 12.5 percent. The trough, according to Lereah, was in September of 2006, when home sales volumes hit bottom. There were, however, modest gains through the end of 2006, according to the economic study. NAR forecaster, Lawrence Yun, predicts home sales volume for 2007 will rise by two percent over last year, with sluggish price growth, as the excess inventory is absorbed. Yun sees price growth outpacing the inflation rate by 2008.
Weathering the storm
While it is impossible to say our region does not have buyers who are experiencing an economic pinch if they bought at the top of the market with adjustable-rate-mortgage instruments or other risky loans, the wise consumer who has stayed within a budget is likely to weather this adjustment in the market.
Just as Wall Street is bemoaning the bankruptcy of some of its risky-loan lending companies, consumers who were lured by teaser mortgages into loans they could not afford in the longer run, are also in difficulty. The industry would do well to undertake an educational campaign to inform near-default clients how to restructure their existing mortgage, to enable them to remain in their homes.
Many homeowners who are in jeopardy of defaulting on their mortgage come too late to the negotiating table. Contrary to some speculation, mortgage companies do not want to be homeowners. The thing to keep in mind during this difficulty is that housing investments have averaged a six percent return, beating Wall Street as a secure investment tool. It is an asset worth holding on to.
While our region enjoys one of the lowest unemployment rates in the country, and a still strong and growing economy, our focus as a society and within our business models should be to build stability in our communities. Given the market corrections underway, 2007 has the promise to be an increasingly favorable backdrop for buyers who are responsible consumers, and for sellers who price to the market.
Jeni Upchurch provides a weekly update on the real estate market. She is a licensed agent with McEnearney Associates old town, Alexandria office, and practices in northern Virginia and the District of Columbia. Buyers and sellers can reach her directly at 571-216-6701 for consultation. She is a former Assistant Secretary, U.S. Department of Housing & Urban Development.