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Economist: Housing Recovery Just Ahead, Portland Market in Relatively Good Shape

September 24, 2008 - PORTLAND -- The nation's home market is poised to recover in 2009, and conditions in Portland are more favorable than in many markets, the chief economist of the National Association of Realtors said Thursday.

Lawrence Yun made his comments before a packed room of real estate professionals at a breakfast meeting of the Greater Portland Board of Realtors. Yun is a well-respected economist nationally whose projections are widely followed in the housing industry, although critics say his forecasts tend to be too optimistic and seem to downplay problems.

Yun's visit came amid a period of historic turmoil in the U.S. economy, including this week's banking and stock market crisis, which is contributing to the further erosion of consumer confidence.

The housing recovery could stall, Yun said, if first-time buyers who are waiting for prices to bottom out aren't convinced that now is a good time to move. Public uncertainty and a real loss of wealth associated with the ongoing crisis in financial markets also could keep potential buyers sitting on the fence, he acknowledged.

Yun said that despite perceptions, home sales in many markets are rising again, including some in California, Nevada and Florida, which had been battered by overbuilding. The primary reason: Prices are way down, cut by roughly half since 2005 in some formerly hot cities, such as Las Vegas and Fort Myers, Fla. Mortgage rates are historically low as well.

In Maine, Yun said that sales activity, which rose from 2001 until 2005 before sliding to 1997 levels, is picking up. He expects further improvement next year.

In Portland, median home prices, which grew to $250,000 or so by 2005, have fallen slightly, but not nearly on the scale of distressed cities that attract headlines. During July in Cumberland County, median prices fell to $239,900, a 6 percent drop over last year.

"The market didn't heat up as much here, so the reduction is more modest," Yun said.

The city also might be in better shape because it hasn't experienced the rate of job losses that some markets have. In a brief interview after his talk, Yun said he sees a pent-up demand for home buying in Portland. But he acknowledged that people might be uneasy about making a major purchase right now.

And all of the financial uncertainty "may hold back buyers," he said.

The health of real estate in New England is tied in part to Boston's economic engine, Yun said, and Boston's employment market is relatively strong.

Yun's views are of keen interest to local brokers and others in the housing industry.

As the lead forecaster for home sellers, his assessments are followed closely by those looking for signs of change in the beleaguered market. He is a frequent guest on national news programs, and earlier this year, USA Today ranked Yun fifth on its list of top economic forecasters.

But Yun is not universally admired and does not have a perfect track record.

Critics have said that the Realtors association in general, and Yun in particular, downplayed the existence of a bubble in housing prices, as well as what they see as the ensuing crash. On the Internet, there's a blog devoted to following and ridiculing Yun's predictions that's called "Lawrence Yun Watch."

In Maine, though, Yun's assessment is more in line with that of Charles Colgan, a former state economist and University of Southern Maine professor. Maine didn't experience the price bubble some other regions did, Colgan has said in recent interviews, but it still could take a year or more for the state's market to turn around.

Two of the city's most experienced realtors, both of whom attended the meeting, said they agree with many of Yun's observations.

David Banks, owner of ReMax by the Bay, said this is a good time to invest for people who have secure jobs and financial assets. For sellers, the key is presenting an attractive price.

"I think it was very positive," said Dottie Bowe, operating principal at Keller Williams Realty. "It's the message we're trying to convey to buyers. You can't time the market."

Yun's visit to Portland -- his first trip to Maine -- coincided with reports from local brokers that southern Maine's housing market is beginning to pick up. They credit moderating prices and lower interest rates.

Those observations support Yun's findings that markets have become increasingly local. One example is the fallout from subprime lending: Sharp price declines can be traced to specific neighborhoods, not just cities. He cited areas of Detroit, Miami and Las Vegas where prices have fallen 40 percent.

The evaporation of subprime loans has taken many potential buyers out of the market, but Yun said that's a good thing in the long run.

"We're not just interested in pushing for home ownership," Yun said. "We want sustainable home ownership."

What's helping to replace that credit is the backing of the Federal Housing Authority and the housing stimulus package passed by Congress.

New home construction is another measure of the housing market, and in Maine, housing starts have plummeted from a peak of roughly 8,000 in 2004 to an estimated 3,000 this year. Yun said the drop in new homes is "a needed adjustment," despite layoffs in the construction industry.

"One way to stabilize the housing market is to reduce inventory," he said.

By TUX TURKEL, Staff Writer, Portland Press Herald, September 19, 2008


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