Following a two-year recovery in the housing market, the National Association of Realtors’ chief economist expects sales to level off.
"Right now there are two opposing forces; higher mortgage rate anticipation, which is always a negative, and more job creation, which is a positive." said Lawrence Yun, "So, I think it will be a more neutral year in terms of home sales."
Yun spoke to members of the St. Louis Association of Realtors Thursday morning. His key points for this market:
- St. Louis' housing recovery has been slower than the rest of the nation.
- Home prices are rising, as are interest rates.
- Home prices are outpacing income levels in the rest of nation, but in St. Louis they remain in line.
He predicted mortgage rates will go above 5 percent by the end of the year. But he said rising interest rates aren't the reason for the slow growth. Instead, he placed much of the blame for lagging home sales on a lull of new housing construction.
New residential construction for January fell 16 percent from December to a seasonally adjusted rate of 880,000. That was far below the forecasts of 980,000.
Yun said small construction companies are having a hard time getting loans and that means contractors aren't building new houses.
"That is holding back some of the economic potential, so we hope more credit begins to flow and that will naturally flow into more job creation," Yun said. "We then would move into a virtual circle of more jobs and greater economic activity."
The economist said new home construction will have to increase by about 50 percent to reach normal levels.
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