Now that we’re closing in on the end of 2009 — and most people will be glad to bid good riddance to an economically brutal year — many experts are making their predictions for 2010.
Lawrence Yun, the chief economist for the National Association of Realtors, recently released his predictions for next year’s real estate market. Of course, many consumers roll their collective eyes at this, since he's an expert on the payroll of an organization that has a vested interest in keeping information upbeat. And Yun is often broiled in comments from real estate bears.
Yun, however, is a respected economist, and while one may want to take his predictions in context, he’s had a pretty decent track record. One problem with economics is that the average person thinks it’s an exact science because it appears to be all about numbers. You add, you subtract, you divide, you multiply…how hard can it be?
In fact, economics is a very divisive field because it can be much more subjective than objective. When it comes to economics, numbers are a matter of interpretation.
So, before looking at Yun’s predictions for 2010, let’s see how he did in 2009. In his forecast released in October 2008, Yun wasn’t perfect, but it would be difficult to find an economist who was.
For 2009, Yun predicted existing home sales would rise and hit 5.4 million and new homes sales would fall under 500,000. On these counts, Yun was on target. In September, existing home sales were at an annual rate of 5.54 million. That spiked to an annual rate of 6.10 million in October, which Yun is crediting to the first-time home buyer tax credit. New home sales were on an annual pace of 430,000 units in October.
On the downside, Yun saw unemployment peaking at 6.7 percent mid-year and “steadily heading down” after that. Of course, we now know that unemployment peaked at 10.2 percent in October.
A look ahead
Now on to 2010 a synopsis of what Yun predicts:
• He sees the extended home buyers tax credit creating more demand and predicts a 20 percent increase in sales over the first half of the year as compared to the first half of 2009.
• Yun says this will result in a drop in inventory of homes for sale and that we will see an increase in home values by mid-year. He predicts that the median sales price will increase 2 to 4 percent for the year and that pent-up demand for new homes will lead to a 50 percent spike in sales from historically low levels.
• As any good economist would, Yun is hedging his bets on a couple of key factors. He says sales and price increases are contingent on interest rates staying between 5 and 5.5 percent. Currently, rates are under 5 percent. He also says that the Gross Domestic Product must climb 3 percent for the year for enough jobs to be added to the economy. He says we should see positive job growth in the spring.
Overall, Yun’s predictions are for a year any would take after coming through the dark tunnel that was 2009. Whether he proves correct…well, we’ll have to wait a year to find that out.