Do you want to help heal the U.S. economy? Don’t list your house for sale this year.
That’s the main point I took away from the Chicago Association of Realtors’ Regional Economic Forecast 2009, held January 15th at the Palmer House. The panel, which I moderated, featured presentations by three economists and a leading Chicago real-estate analyst. The consensus among them was that the key to a housing recovery is getting more people confident that this is a good year to move.
“Let’s get buyers back into the market to absorb [housing] inventory,” said Lawrence Yun, the chief economist for the National Association of Realtors. Yun and others talked about various ways to do that—such as publicizing data that show housing is far more affordable now than prior to the boom, and by making the $7,500 first-time buyer’s tax credit, a temporary measure, a permanent addition to the tax code.
One panelist, Michael Miller, a professor of economics at DePaul University, warned about a potentially counterproductive move by home sellers. Miller noted that many homeowners who may have wanted to sell in the past few years wisely sat it out. But once the real-estate market shows signs of improving, those same people may put their homes up for sale. “I’m concerned that when this group enters the market, we will see another supply problem,” Miller said.
Homebuilders, Miller pointed out, slowed or halted their production of new inventory last year and are unlikely to start up again in large numbers until they see the current stockpile thinning out. But individual homeowners aren’t quite so attuned to their role in the supply pipeline, and a sudden inundation of those for-sale homes could hinder any real-estate rebound. Yun added that the number of homes lost to foreclosure—and then put back on the market—may also increase with mounting job losses. That would add even more supply when demand is still weak.
Demand for homes might improve when potential buyers respond to the new, low interest rates (which Yun says may drop even lower this summer), and when they see any signs in the larger economy that will make them more confident, the panel said. That may take some time. “Pessimism is so thick you can cut it with a knife,” said James Glassman, managing director and senior economist at J. P. Morgan Chase & Co.
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