Demand, mortgage rates helping local Realtors, economist says

    O’FALLON — Real estate agents battered during the Great Recession are in for better years — four of the next five, if one expert’s forecast holds true.
    The words of Dr. Lawrence Yun were music to the ears of members of two Realtors associations who attended the recent 2015 Metro East Economic and Real Estate Forecast.
    Yun, who is chief economist of the National Association of Realtors, said pent-up demand, more jobs and manageable mortgage rates are making this a buyer’s market. People who have been wanting houses the last few years are again finding favorable conditions.
    “I think we’re in for a multi-year recovery,” he told the audience assembled at the Regency Conference Center in O’Fallon. Attendees were made up of members from the Greater Gateway Association of Realtors and the Realtor Association of Southwestern Illinois.
    Realtors have been on edge. Following the burst of the housing bubble in 2005 there were several declining years, followed by a few years when the numbers basically “went sideways,” Yun said.
    By 2012, local housing sales were up 10 percent. In 2013, they increased 17 percent. Yung used St. Clair County year-over-year sales figures to crunch his numbers, but indicated that surrounding counties had similar statistics.
    The year 2014 started off as a setback. Local numbers were down 1 percent in the first quarter and down 3 percent in the second. Even so, they managed to beat national numbers (down 10 percent in quarter one) and despite terrible weather in the first part of the year.
    Housing sales jumped 8 percent in July, however. And the local numbers overall have been beating national sales numbers.
    Local agents are feeling good, said Deb Frazier, the chief executive officer for the Realtor Association of Realtors.
    “St. Clair County recorded a 1.2 percent increase in home sales this August compared to August 2013,” she said. “Realtors in St. Clair County sold the highest number of homes this August than in any August of the last five years.”
    In August 2014, Monroe County surpassed the number of homes sold last August by 44.1 percent. The county also recorded the highest number of homes sold in a month for August in over five years, as well as, the highest number homes sold in a month in several years. Compared to August 2013, Realtors in Randolph County reported a 27.3 percent increase in home sales in August 2014, Frazier said.
    Frazier said they were still compiling stats for September and did not have them ready.
    Yun said the year may end slightly down compared to last, he said, but with more inventory and record high household wealth, the doctor is predicting “improving years” for four of the next five.
    “I don’t say five out of five because economic data never takes a straight-up, level path … there’s always a little volatility,” Yun said.
    A traditional housing recovery is generally marked by seven improving years, he said.
    Not everyone will cash in, however. Housing prices in the Midwest are up only about 5 percent, he said.
    And not every Realtor stands to benefit, either, he noted. Some 20 percent of the members of the 1-million-strong national association make six figures in annual sales commissions. But some 30 percent make less than $20,000, he said.
    Interest rates are better than ever and may have hit their lowest point during the recent stock downturn. Now, Yun expects them to go back up.
    “I believe in 12 to 18 months we’ll be back to 5 percent mortgage rates. The Federal Reserve has said they can’t pursue this loose monetary policy forever. But 5 percent is still attractive,” he said. Late last month, the average for 30-year mortgage rates was hovering in the 4 percent range.
    Yun cited a number of factors that lead him to be upbeat.
    – The national credit-scoring company FICO has eased its scoring methods and expects to no longer punish consumers who miss — and later make up — single mortgage payments. Those credit scores are used by most major lenders to determine a loan applicant’s credit worthiness.
    – Mel Watt, the director of the Federal Housing Finance Agency, which oversees the Fannie Mae and Freddie Mac lending programs, is pushing for those agencies to loosen their lending restrictions. The quasi government agencies recently generated a $25 billion profit paid to the government treasury, a significant turnaround, although the agencies are still in conservatorship, thanks to the government bailout in 2008.
    – The FHA instituted what it calls the Hawk Program, aimed at educating home buyers with a goal of reducing future FHA loan defaults.
    The tight credit policy cannot last, he said, and the ludicrous nature of it was on display recently when even former Fed Chairman Ben Bernanke could not get his mortgage refinanced, while he was technically between jobs. That, despite the fact that he can command $100,000 speaker fees and is one of the most financially apt men alive.
    “That shows the extent of the tightness of mortgage credit,” Yun said.
    Yun, who is senior vice president of research, regularly forecasts market trends for the national association. He appears regularly on financial news programs and has testified before Congress.