Housing market faces obstacles to recovery, according to Yun

Dr. Lawrence Yun, NAR chief economist

The second half of 2011 should see an improvement in the housing market over the same time last year, according to Dr. Lawrence Yun, chief economist and senior vice president for research for the National Association of Realtors®.

Yun, who spoke to the Economics Club of the York County Chamber of Commerce in York yesterday, gave an overview of the economic situation to more than 100 business professionals, including many Realtors®.

“This was going to be a good recovery year but the economy is beginning to stall again,” Yun said. The country’s gross domestic product (GDP) is only showing 1.5 to 2 percent growth when the normal is 3 percent and 4 to 6 percent is needed to recover from the recession, he reported.

He said it’s puzzling that many companies are showing all-time high profits, yet they aren’t expanding or increasing their workforce.

There are many obstacles to the country’s economic recovery, including high gas prices. “High gas prices are a daily reminder to consumers that something is wrong with the country and it’s hitting their pocketbooks,” he added.

“I believe housing is a big driver to the economy and as long as the housing market hasn’t recovered fully, it’s holding the economy back,” Yun said. He said homeowners wanting to sell are competing with distressed properties and builders are held back because of distressed properties. He said few construction loans are available to builders.

Despite the fact that there are an additional 27 million people living in the U.S. since 2000, housing sales are trending toward 2000 figures. Pennsylvania’s sales are below the 2000 level, trending to 1995, according to Yun.

“This implies there’s pent-up demand,” Yun said. “Many people are doubling up with roommates or moving back with their parents so we aren’t seeing the increased demand for housing. As the economy comes back, we’ll see that pent-up demand for housing.”

Housing affordability, which takes into consideration wages and home prices, is at an all-time high. “There has never been a better time to buy,” Yun said. However, many buyers are having trouble getting mortgages. “Underwriting standards are exceptionally tight and I’m hearing that from Realtors® across the country,” he added.

“Credit is only going to the upper crust with unblemished credit history,” he said. “Loans are only going to those with very high credit ratings. And this is holding back the economic recovery level.”

Yun said delinquent mortgages have peaked but are still higher than normal. However, the majority of delinquent loans are a residual of mortgages given between 2004 and 2007.

Homeownership has great value to the country, Yun added. “There are intangible benefits to people owning a piece of America.”