2007 real estate outlook: Some are bearish, but many optimistic for recovery

A new year brings fresh new looks at the housing road ahead.  We took a look at a number of regional and national 2007 real estate forecasts.  Experts are telling us that they are guardedly optimistic the coming year will see a rebound in sales, probably near midyear, steady interest rates if not a drop, and a likely bump in the amount of work for residential appraisers.

On the bearish side, Moody’s Economy.com, which produces private economic research, estimates that the median sales price for an existing home will decline 3.6 percent nationally in 2007. If true, that would be the first decline in the median sales price since the Great Depression.  The company estimates that nearly 100 metro areas will experience a “measurable” decline in housing prices.

Fitch Ratings’ lead homebuilding analyst Robert Curran said that the absence of investors in the pool of home buyers in 2006 caused an oversupply problem.  While that should correct itself comparatively quickly, he suggested, “negative buyer psychology seems to have become pervasive, with the expectation or fear that home prices have peaked and buying now would be a mistake.”

The National Association of Realtors (NAR) forecast at its annual conference in November that while existing home and new home sales would both fall in 2007 from 2006 levels, the rate of deceleration in both cases would ease.  New home sales fell by 17 percent from 2005, the group estimated, and would sink 8.7 percent in 2007. Resales were down 8.6 percent in 2006 and should decline only 0.8 percent this year.

NAR’s California counterpart, the California Association of Realtors, in October forecast a modest decline in home price appreciation and a decreasing sales pace in the Golden State.  The group said the Central Valley, San Diego and Riverside/San Bernardino regions of the state would experience a sharper downturn than the rest.

The Mortgage Bankers Association (MBA) foresees housing oversupply tamping down construction, sales and prices until midyear.  Home loan production, which the group said would fall 19 percent in 2006, is supposed to be off another 14 percent in 2007. California’s mortgage brokers say the first half of 2007 will be an ideal time to buy a home: “During that period, there will be fewer buyers, more housing inventory, low interest rates, and more motivated sellers,” Jack Williams, president of the California Association of Mortgage Brokers, said.  The group said fixed rate loans will make a comeback in their state as homeowners refinance.

The National Association of Home Builders (NAHB) is eyeing an 11.7 percent drop in housing starts in 2007, after an 11.5 percent fall in 2006. But David Seiders, NAHB Chief Economist, said he expects that starts would “bottom out” in the first half of the year, and that builders are picking up on a “change in market momentum.”