Facts & Forecast!
In looking over the numerous notes from Leslie Appleton-Young’s update (what else would you expect from an economist?), the main factors driving sales up in 2008 were:
Declining prices equaling improved affordability
Bargains equaling great deals and distressed sales
Favorable rates for qualified buyers such as found with FHA and VA loans (we saw a substantial increase in these types of loans this year)
First time buyers getting younger
Declining inventory in 2nd half of the year
More investors showing up
International buyers showing up
She also gave numbers for the sub-prime arm resets in 2008 and estimated for 2009 and 2010. I think this is where it gets interesting because this is a big factor in pulling down home values (resulting in numerous short sales and foreclosures). The average % to reset in 2008 was estimated at 44% but will go down to 17% in 2009 and 7% in 2010. I think this is very good news although it will need other factors in the economy to cooperate. However, it is a good sign.
Her forecast for 2009 includes a weak GDP through the second quarter of 2009 and an improved outlook in the second half of the year. She sees a weak job picture with the unemployment rate going up. Inflation will be a concern (duh!) but in check and we are likely to see a stimulus package in early 2009. Her critical concern is how soon will financial systems stabilize and enable economic activity to return to normal.
My 2 cents – It’s hard for me to separate my own joy at Obama being elected president but perhaps the folks who backed the republican way of thinking are feeling cautious about whether they will be getting the support they want (and are used to) from this upcoming administration. We are still in a wait and see situation until we all have a feel for how we will “play together”.