Home Sales Would Rise 15-20 Percent With 720 FICO – NAR

Lawrence Yun, chief economist for thernNational Association of Realtors® (NAR) said Thursday it might be time to “dialrndown the credit stringency.”  If therncredit scores required for a mortgage returned to the more normal levels ofrnabout 720 for conventional loans and 660 for FHA loans, he said, home salesrncould be 15 to 20 percent higher than they are. rnDuring the past four years the average scores for approved conventionalrnloans have been in the 760 to 770 range.</p

About 51 percent of renters couldrnqualify financially to purchase a home compared to 24 percent in 2005 and 33rnpercent in 2000.  While their creditrnscores are unknown, “there are about 8 million more renters with the incomernnecessary to buy a home now than in 2000, but they are choosing not to or arernunable to become a homeowner” Yun said.</p

Yun, speaking at a residential realrnestate forum during the Realtors Midyear Legislative Meetings in Washington,rnsaid, “Steady job creation and household formation have been helping to unleashrna pent-up demand in the housing market. <bLagging house starts and a continuing housing shortage means home pricesrnwill rise further.”  He projects thatrnmean home prices will be up a cumulative 13 percent over the next two years.  That will add more than $2 trillion tornhousehold wealth.</p

 Existingrnhome sales are continuing to improve but inventory constraints are preventingrnstronger growth.  Existing home salesrnrose 9.4 percent to almost 4.3 million in 2012 and are forecast to increase tornnearly 5.0 million this year.  Yun saidrnhe expects 5.3 million sales in 2014 and 5.7 million in 2015.</p

More new home construction is likely tornmodulate the growth in prices.  Yun saidrnthat right now inventory is bouncing near 13-year lows but some relief willrnoccur later in the year.  He said hernexpects most of the 13 percent price increase to be front loaded in 2013 withrnabout 5 percent occurring next year.</p

LaVaughn Henry, vice president andrnsenior regional officer at the Federal Reserve Bank of Cleveland said that allrnhousing measures are pointing to a solid and sustainable recovery with anrnalignment of fundamentals of what makes housing work. The ratio of home pricesrnto rents indicates that home prices have recovered to a fair value and buildersrnare responding to higher demand by gradually rebuilding the diminished supply. </p

Henry said that housing has always ledrnan economic recovery but he hopes that this time it can boost it into arnstronger recovery.  “Growth in the GrossrnDomestic Product is running at about half speed for tis point in the recovery,”rnhe said.  Fiscal austerity is a drag onrngrowth in the short term, but it’s important to get control of debt.

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