Lawrence Yun, NAR chief economist of the National Association of Realtors, said the market will come into clearer focus this summer.  “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said.  “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets.  The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent lower than the February 2007 index of 107.6.  “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun said.

The PHSI in the Northeast rose 3.2 percent in February to 71.8 but remains 25.4 percent below a year ago.  In the Midwest, the index declined 3.7 percent to 82.7 and is 17.4 percent lower than February 2007.  The index in the South fell 5.5 percent in February to 85.0 and is 30.3 percent below a year ago.  In the West, the index rose 2.1 percent in February to 95.8 but is 6.1  percent below February 2007.

Existing-home sales are likely to rise from an annual pace of 4.9 million in the first quarter to 5.9 million in the fourth quarter.  With relatively weak activity in the first part of the year, existing-home sales for all of 2008 are forecast at 5.39 million, increasing 6.6 percent to 5.74 million in 2009. 

“Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year,” Yun said.  The aggregate existing-home price will probably ease by 1.4 percent to a median of $215,800 for all of 2008 before rising 3.7 percent to $223,800 next year. 

“The economy will not grow in first half of the year,” Yun said.  “However, the combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half.”  Growth in the U.S. gross domestic product (GDP) is expected to be 1.4 percent in 2008 and 2.4 percent next year.  The unemployment rate is forecast to average 5.4 percent this year and 5.6 percent in 2009.