Lawrence Yun is the Chief Economist for the National Association of Realtors, the nation’s largest trade organization with 1.2 million members. In early September, Mr. Yun offered members his views on the recession, the recovery and the status of the national real estate market.
From an economist’s perspective, the recession is over. Economists who see recent production trends feel the fundamentals of a recovery are in place. The troubling unemployment figures are considered a lagging indicator. Unemployment is not expected to begin recovering until late 2010. Yun asserts that the country will not fully recoup the 7 million lost jobs for three years. This cannot spell good news for the struggling housing market.
The 2009 first-time homebuyer tax credit has been a successful initiative of the Obama Administration. Unlike its predecessor, the 2009 version does not require repayment. The NAR credits the bill with creating 1.2 million transactions, which in turn created 1.2 million sellers, most of whom became purchasers. The 2009 first-time homebuyer tax credit is set to expire on November 30th 2009. Yun and the NAR are pushing hard for an extension of the bill. In fact, the group has proposed some fairly sweeping changes, which would add all homebuyers to the tax credit eligibility list and increase the amount of the credit from $8,000 to $15,000.
While Yun feels the recovery is underway, he takes a guarded view of the sustainability of the trend. The uncertainty lies in the commercial and industrial real estate markets. Neither of these sectors received stimulus assistance. However, Yun takes heart in the fact that the Federal Reserve is taking the commercial real estate market under consideration.
Yun was generally optimistic about the status of the healing residential market. Existing home sales in July rose 7.2% over June sales to a seasonally adjusted rate of 5.24 million units. This marks the largest month over month gain in 10 years. Sales of existing homes rose 5.0% above sales in July 2008. The July Affordability Index dropped slightly but still remains favorable.
To sustain the positive trend in the housing market, Yun outlined a few critical essentials. Primary to the recovery is the extension of the existing tax credit bill or adoption of the newly proposed version. Currently both bills are under review in Congress, but neither Treasury Secretary Geithner nor President Obama has whole-heartedly endorsed the legislation.
Yun is pushing for an expansion of the stimulus citing that an increased government investment to $15 billion is certainly justified for the largest segment of taxpayers, the American homeowner. Echoing a consistent theme long referenced by Warren Buffett, Yun cites the need to clear the marketplace of the existing backlog of inventory as critical to the success and sustainability of the recovery. Yun further points out that the treacherous combination of high unemployment and the rising number of homeowners whose properties are underwater will continue to plague the foreclosure market through 2010.