If you’ve been waiting to buy or sell a house, there is still time to catch the tidal wave of good times.
That’s the opinion of John Tuccillo, consulting economist for the National Association of Realtors (NAR).
Speaking at the recent NAR convention in New Orleans, Tuccillo predicted that sunny economic skies are “locked in for 1998.”
However, he hedged his bets by noting that two wild cards–Asia’s economic problems, and the high rate of consumer debt in the U.S.–could have negative impacts in the future.
Tuccillo described the current residential real estate market as strong and balanced, providing favorable affordability conditions for buyers and excellent selling conditions for owners.
“I’m relatively confident we will see more of the same in 1998. Although sales of existing homes likely will taper off from a record-breaking 4.15 million this year, the 1998 market will remain quite strong, with sales remaining above 4 million units. Given the cyclical nature of real estate, this is the best balanced overall market the industry has seen in years,” he said.
“There is a lot of demand, and it is consistent across the country. Consumer confidence is soaring.”
New home sales also will be solid, according to Tuccillo:
“Home construction will be strong. Housing starts, though, seem to be a function of supply, not demand. When lenders have plenty of money for construction loans, builders will build.”
According to NAR, the national median price for a new single-family home will be up 6.5 percent this year to $146,000; it is expected to rise an additional 10 percent in 1998 to $157,400.
For existing homes, NAR estimates that the national median price of a single-family home will rise about 6 percent this year to $124,800; it will rise an estimated 4.5 percent in 1998 to $133,500.
“Given the overall stability of the economy and low inflation, if there is any pressure on mortgage rates, it will be down,” said Tuccillo.
He believes that fixed-rate, 30-year home loan rates will dip to between 7 and 7.5 percent.
Other good news for home buyers is that they are now in the driver’s seat.
In the past, Realtors controlled the information and the transaction, according to Tuccillo: “Now, because of the spread of the Internet and other new technology, buyers have all the leverage.
“Real estate is an information business, and consumers can put it all together on the Internet. They have access to more information and know how to use it.”
He described Internet commerce as “the wave of the future,” noting that 27 percent of Internet users made online purchases in the past 12 months.
How will real estate agents deal with the increase in online activity by buyers?
“They will have to turn information into knowledge and add value to the transaction,” Tuccillo said. “This can be done by offering one-stop shopping, and reducing the stress of the home buying process.”
However, he indicated that agents may be slow to adapt because of the current good times: “Today’s boom in home sales could be a barrier to change. Agents say, `Why change if I’m making money?’ “
He said Realtors’ success will be bolstered by a continued strong economy: “I’m very bullish on the U.S. economy. With low inflation, we will maintain slow but steady growth over the next decade.”
He labeled the American economy as the best in the world.
Tuccillo believes the economic troubles in Asia will follow the Mexican pattern, and become stabilized within two or three years.
He predicted that China’s 10 percent annual growth rate will slow over the next decade.
As for Russia, he said its economy “is following a familiar pattern, with a swaggering capitalism that suggests what we experienced after the Civil War.”
