Will Home Sales Rise This Year?

This is the big question that a lot of people are asking. The answer rests in the numbers, or as the great detective Sherlock Holmes always said, "It's elementary."

According to the National Association of Realtors (NAR), we ended the first quarter of the year with existing homes selling at an annualized pace of 5.1 million homes.

As for the rest of the year, I see even better results, and here's why:

• Jobs, Jobs and more Jobs! We have been adding jobs each month for the past several months now, and when people are working they will spend money. We are not at the levels we want to be at in terms of job creation, but we are headed in the right direction.
• Rising Rents. It is getting more expensive to rent apartments today, and as the gap closes between rent and paying a mortgage, home sales will increase.
• Affordable Housing. Much to the dismay of those who bought their homes at the height of prices, values have gone down a lot and thus offers some great opportunities for new buyers. I would argue that the prices that were being paid 5, 6 and 7 years ago were never justified. They were so inflated, and now what we see are home prices at more justifiable levels.
• Pent Up Demand! There are a lot of people that want to buy their first home and have not been able to do so due to job loss, or loss of money in the stock market, or tighter lending has prevented them from buying. There are also many folks that want to sell their current homes and buy new ones but can't because of the loss they would take selling their home. This demand has not gone away. Those people are still out there and as home values keep stabilizing and money loosens up, these people will be buying and selling.
• Consumer Confidence. As consumers continue to feel better about the overall economy and their own situation in particular, they will open their wallets again. A happy, confident consumer is a spending consumer.

So if you look at the numbers and we continue, or improve, on the first quarter annualized sales pace of 5.1 million homes, we should easily exceed last years 4.9 million home sales.

Realize, that like anything in the economy, there are obstacles in the way of this growth. The biggest is at the pump. High gas prices as we have been seeing will drop consumer confidence in a heartbeat. We also have to contend with even more possible interference from our friends in Congress. As we speak, Washington is considering ending government guaranteed mortgages like FHA and VA. They are also looking at requiring minimum down payment of 10-20 percent. That will eliminate a major number of new homebuyers. And yes, there is very serious attempts being made to reduce or omit the mortgage interest tax deduction.

Any of these things can slow down any kind of recovery in housing.I'll keep watching what happens and keep you posted in future blogs.