Thursday, March 28, 2002
Realtors aim to keep sales pace
Fed's actions may have effect
By Jeff McKinney, firstname.lastname@example.org
The Cincinnati Enquirer
After posting record-setting sales the past two years, the million-dollar question now is: Can Greater Cincinnati's housing market sustain its banner pace this year?
Just this week, low mortgage rates, mild winter weather and rising consumer confidence helped Tristate home sales rise 4.8 percent in February, triggering a record sales pace for the first two months of 2002.
Now, local Realtors are hoping that lower mortgage rates will be enough to entice consumers particularly first-time home buyers tired of renting and sellers interested in moving up to sustain the market.
James Crowder of Lunsford Roofing in Harrison, Ind., cuts decorative copper sheeting that will be installed over a bay window in a new home in the Keehner Meadows subdivision in West Chester Township.|
(Michael Snyder photo)
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More than 100 Tristate agents and executives in the residential and commercial real estate business got a view of what might lie ahead locally and nationally Wednesday at an economic outlook breakfast by the Cincinnati Area Board of Realtors and the Commercial Real Estate Council.
Industry experts remain bullish on the housing market, saying it has helped keep the nation from sinking into a deep recession, and it has been a key reason for the apparent rebound.
But what will happen to the recovery including home sales if the economy continues to heat up this year, forcing the Federal Reserve to raise rates to cool things off?
We're in relatively good shape right now, but we don't want a robust recovery because that could force the Fed to act, and that could affect such things as consumer borrowing and business investment, said David Lereah, chief economist at the National Association of Realtors.
He predicts that the nation's housing market this year after experiencing record sales of about 5.3 million units last year will remain strong, but come in at 5.27 million this year.
Mr. Lereah said he's a little concerned that the record home sales in January and February were fueled by consumer fears that the Fed will eventually raise rates. He also said the mild winter weather might have caused people to buy now, potentially taking some steam out of the traditional spring home-buying season that typically kicks off in May.
It makes you wonder if we stole some sales from the spring, he said. Mr. Lereah also predicted that the Federal Reserve by year's end could raise its federal funds rate what banks charge one another for overnight loans 3 percent to 4 percent. After 11 interest rate cuts by the Fed since January 2001, that rate now is at 1.75 percent, the lowest in four decades.
Still, Mr. Lereah said home sales in Greater Cincinnati and the country will remain strong this year and in 2003 as long as the economy does not grow too fast and mortgage rates remain stable. He estimates that the average U.S. rate on a 30-year mortgage will be 7.5 percent by year's end.
Local real estate executives are also optimistic.
I think we can sustain another record year, because even if rates rise a bit, they're still below 8 percent, said Kathy Koops, president of the Cincinnati Area Board of Realtors.
She said first-time buyers and first-time move-up buyers continue to drive the market. Indeed, 88 percent of the 2,453 homes sold in Southwest Ohio in January and February were priced at $250,0000 or less, according to the Cincinnati Area Board of Realtors. Of those, 50 percent were priced at $130,000 or less.
She said home prices continue to appreciate and are seen as better investments and less riskier than such things as stocks. That could help keep sales vibrant.
I keep hearing every month that sales are going to drop, but that hasn't happened yet, Ms. Koops said.
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