ATLANTIC CITY - Pent-up demand for houses will drive increases in home sales and prices next year, but credit markets will continue to hobble important market segments at the New Jersey shore, Lawrence Yun, chief economist for the National Association of Realtors, said Wednesday.
Yun said there may be a slowdown in housing demand in January and February, but it will pick up in March and April, resulting in a 14 percent increase in existing home sales in 2010 and a 4 percent rise in prices nationwide.
Sales this year were at 2001-02 levels, Yun told the N.J. Association of Realtors convention, but the nation has grown by 30 million people since then.
New households formed at a rate of about 2 million a year from 2005 through 2007, but with the economy and housing slump pushing people to move in with friends and family, only a million households formed each of the past two years, he said.
"So how is it possible that you have this many additional people, yet home sales only match that level, which implies there could be some pent-up demand, and it's only a matter of time before releasing that pent-up demand," Yun said.
He rejected the premise that the $8,000 first-time home buyer tax credit - which recently was extended through April and expanded to give a $6,500 credit to buyers who owned a home for five of the past eight years - had taken future demand out of the market.
The number of renters with the income needed to buy a median-priced house also has increased, from 11 million in 2000 to 16 million in 2009.
"This is implying clearly there is a large segment of people who are not yet homeowners who have the necessary income to buy a home," he said. "The argument that all the pent-up demand has been used up (by federal housing incentives) is false, because there is pent-up demand out there that can come to the market."
Increased demand won't help many market segments - including ones crucial to the N.J. shore market - because dysfunctional credit markets are withholding the financing needed for those markets to work, Yun said.
Although mortgage interest rates are at record lows, those loans are for single-family, primary residences only, not mortgages for other property purchases.
"We need to see lower rates on jumbo loans, lower rates on second-home purchases, which is important in the Atlantic City region, lower rates on condo purchases, and we are not there yet," Yun said.
Financing is extremely difficult to get for commercial real estate, so very few are buying those properties, he said, which will reduce commercial sales further next year.
And new home construction will only reach 600,000 next year, he said, far below the 1.3 million to 1.7 million typically required by new households and replacement of existing housing stock.
But the existing home market in the state is prepped for growth, he said.
"New Jersey sales are picking up, and though they're not back to the normal years, at least it appears that the worst is over and the momentum is building," Yun said.
Stefan Swanepoel, a researcher of real estate industry trends, told the large gathering at Atlantic City Convention Center that their emotions - battered by the housing recession - need to catch up with reality.
"Yen is predicting we're going to sell next year 5.7 million homes. That is higher, even if he's off by 10 percent, than any year from 1990 to 1999," Swanepoel said. "We all did well in those years, didn't we? So why can't we do well now? Don't let the negative attitude get you down."
Swanepoel warned, however, that far too many people are working in the real estate industry - 1.1 million vs. about 750,000 in 2000 - dragging down its productivity, standards and image.
He said a study of two markets found that more than half of all licensed agents had no sales in a year.
"They're packing bags at Albertson's or ShopRite, and, unfortunately, those are most likely the people who are giving us the bad rep, because while they're packing the bag and putting in the bread and the milk, they are saying, ‘You wanna buy a house?'"
Swanepoel called the test to qualify for a real estate license "the easiest, dumbest, simplest test I've ever seen."
He urged full-time Realtors to work toward higher standards by mastering multiple specialties such as distressed, international and luxury sales, and technology including social media.
Yun said the housing bubble and bust showed there is a limit to how much home ownership should be encouraged, something Realtor associations have been reluctant to admit in the past.
"People should become homeowners only when they're emotionally ready, financially ready, and not just pushing people into homeownership," he said. "So we are not looking for any homeownership, but successful homeownership."
In a lighter moment, Yun said he ran into trouble trying to lobby for the home buyer's tax credit extension at the White House.
"White House security is very, very tough. I had the meeting set up, they screened my name, and at the end of the day they said I couldn't go in, so I don't know what I did in high school, but it was enough," he said to widespread laughter.
"I routinely go to the Treasury Department, the Federal Reserve, and all of the other buildings, but the White House is really tough, at least during the daytime," Yun said.
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