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Price Expectations – Higher or Lower?

Based on information from the September Realtors® Confidence Index, a monthly survey with responses from over 3,600 Realtors®, 53 percent of respondents have expectations of constant or slightly rising prices for the next year. Price expectations are lower than earlier this year but also somewhat better than a year ago. Realtor® comments indicate that buyers continue to be cautious in their outlook while awaiting a more robust upturn in the economy.

Jed Smith, Managing Director, Quantitative Research

Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.

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Comments
  1. Frank Nason

    Wishing won’t make it so. The only discernible reason the Las Vegas median price of sales rose in September was due to the increase in the size of homes purchased. The median price per square foot continued to decline.

  2. I still think there is a flood of foreclosures to hit the market in the next year keeping prices low or even going lower. I indicated that in the survey but I guess it didn’t convey.

  3. Thomas Lawler

    Almost half of realtors surveyed in September expect home prices to decline over the next year, though by how much is not clear. If that assessment were correct, what would that imply for lenders, whether government backed/sponsored or private lenders in terms of either down payment requirements or mortgage matuirites? Obviously, sustainable homeownership is heavily dependent on the home owner having equity in his/her home.

    To be sure, many potential home buyers can put down a lot; but they could agree to a loan with a short amortization schedule than a 30 year mortgage and as a result pay down principal faster than a 30-year amortization schedule, and as a result build by having a larger share of mortgage payments going to principal reduction rather than interest. Sure, by “traditional” standards they could “afford” as large a home as they might “like” if they did have a larger down payment. BuBut, well, that sorta makes sense! Why not move to a government/private policy where folks with low down payments have to take out, say, a 20-year mortgage (but, of course, still have a qualifying ratio of, say, 25% for total mortgage payment to income) so that they can build equity without having to rely on home price appreciation, which most realtors don’t see in any material way over the next year?

    Obviously, the “learnings” of the past 5-6 years is that sustainable homeownership requires the homeowner to have positive equity in his/her home. Without home price appreciation, that requires either a decent sized down payment or a mortgage where a significant share of the mortgage payment goes to reduce principal.

    It seems “nuts” if the outlook for home prices is cloudy and to the downside to have buyers putting little or nothing down and taking out mortgages where the payment barely reduces principal at all over the first few years, and NAR research and surveys seems to suggest that such lending/borrowing would in fact be “nuts.”