Hi Desert Real Estate Forum

National Association of Realtors chief economist Dr. Lawrence Yun has delivered his 2009 Economic Forecast. Although most of the news is not good, there is a light at the end of the tunnel and possible some real opportunities for home buyers.

According to Dr. Yun, we are now in a recession that will continue for the next 3 quarters. Then a slow recovery should begin in the last half of 2009. Unemployment will peak, according to Dr. Yun, at 6.7 percent in the middle of 09 and then begin a steady decline. Now for the good news, home sales should continue to increase during this period. The reason, affordability. Home prices are falling nationwide and California has shown one of the sharpest increases in affordability. This coupled with near record low mortgage rates will continue to entice homebuyers. Dr. Yun also credits the first time home buyer tax credit and a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program for bringing more homebuyers to the marketplace. In fact, August pending home sales were at a 12 month high and this trend is expected to continue.

Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job holders.

Finally, Dr. Yun states that a recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.

Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs