NAR Chief Econ: Expects Greek Exit;Min Impact on US Grwth,Hsg
--US Home Prices Will Inevitably Rise Through Rest Of 2012
WASHINGTON (MNI) - The National Association of Realtors' chief economist expects Greece to default and eventually exit the eurozone, which, however, should only have a "minimal" impact on U.S. economic growth, and housing as a result.
Lawrence Yun also told MNI in an interview that his positive outlook for the U.S. housing recovery is intact despite the recent slowdown in jobs creation.
Just as Fannie Mae Chief Economist Doug Duncan told MNI recently, Yun underlined that the key is for jobs to continue being created, albeit slowly.
Outside the U.S., Europe continues to bring uncertainty.
Still, Yun said an exit of Greece, where elections are taking place on Sunday, from the eurozone would only have a "very minimal" impact.
"The GDP impact would be maybe 0.2 percentage point," he said, assuming "there is a Greece default and some contagion over to other countries."
"Greece is, in my view, likely to get out of the euro and Greece will suffer greatly from that decision," Yun said.
Once this happens, other countries witnessing the economic harm it will cause to Greece will be discouraged from following the same path.
Spain and Italy, Yun said, will instead become "much more serious about reform that is needed to keep the economy growing."
"Therefore I think this is really a Greece problem rather than a Europe-wide problem," Yun said.
As a result, the chief economist maintains his positive outlook for the U.S. housing market.
Supportive factors for the U.S. housing sector include the shortage of inventory in some markets as well as near historically low mortgage rates which partly offset the job market weakening, Yun said.
Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 3.71% with an average 0.7 point for the week ending June 14, up from the previous week's record low of 3.67%.
"Regardless, mortgage rates still remain near the historic lows helping to keep homebuyer affordability high, and providing a strong incentive for those looking to refinance," Freddie Mac said.
Against this backdrop, "it's inevitable that prices will be rising as we proceed through the year," Yun predicted.
He expects the share of distressed sales in overall sales to decline going forward "because the number of seriously delinquent mortgages has been falling."
That should bring stronger support to home values, which Yun expects to increase 2.5% this year, referring to the median price.
Price increases have already started, he said, pointing out some monthly increases in the Case-Shiller monthly index.
While Standard & Poor's S&P Case-Shiller Home Price Composite-10 Index was down 0.1% in April and the Composite-20 index was flat, prices increased in 12 cities and were flat in Las Vegas.
The NAR reported last month that existing home sales rose at an annualized rate of 3.4% in April, when the median sales price was up 7.6%.
The supply of homes available in April was 2.54 million, the equivalent to 6.6 months' supply at the current rate of sales, up from 2.32 million in March but well below the 9.1 months' supply in April of last year.
The next existing homes sales report is due on June 21 at 10:00 ET.
Overall, despite signs of a slowdown and uncertainty coming out of Europe, "the housing is still moving along nicely," Yun told MNI.
He noted "the buying interest, the shortage of inventory that is beginning to develop in more and more markets" as positive factors.
As a result, "my outlook for home sales and home prices has not changed that much despite some negative economic developments in Europe and also apparent slowdown here in the U.S. economy," he said.
Still, Yun has revised down his growth forecast for the U.S. to 2.2% from 2.5% this year.
On the employment front, he said about six months ago he would have anticipated about 2 million to 2.5 million job creations this year. But given the recent slowdown in the job market, it could be closer to 1.5 million instead.
"Nonetheless, that's a job creation," Yun said.
** MNI Washington Bureau: 202-371-2121 **