Paul Bishop, managing director of Real Estate Research at the National Association of Realtors, spoke with area real estate professionals Thursday about the national economy and how it has impacted the overall housing market.
“The economy will pick up at some point, and at that point I think the real estate market will be well positioned,” said Bishop, speaking at the MeadowView Conference Resort and Convention Center at the membership breakfast of the Northeast Tennessee Association of Realtors.
Bishop said public perception plays a big part in what happens in the local and national real estate markets. Folks turn on the nightly news and hear gloom and doom statistics and stories of layoffs, foreclosures and financial hardship.
“Even if I have a job and a steady paycheck, I’m really concerned about what’s going to happen next week, next month — I’m probably not going to be buying that house I thought I was going to buy a few months ago,” Bishop said.
He said the recession has also created fear among lenders who, in some cases, have squeezed credit standards so tight that folks with good credit can’t even get financing.
“The pendulum has swung too far the other way,” Bishop said.
He said the economy may not have hit the bottom just yet.
“Things are probably going to get worse before they get better,” he said.
Bishop predicted that nationwide housing prices will be down overall this year. Out of 153 markets he tracks, 134 showed price declines last year.
Locally, Kingsport bucked that trend. According to the Multiple Listing Service, which tracks property transactions, the average home sales price within the city limits increased 5.39 percent to $156,008 last year, from $148,024 in 2007.
In the greater Kingsport area — including parts of Sullivan and Hawkins counties and parts of Southwest Virginia — the average home sales price was $144,657 in 2008, up from $137,049 the year before.
And while Kingsport housing prices are up, they’re still affordable, especially when compared with many parts of the country. And affordable housing makes this area an attractive option for folks looking to move from other parts of the country, Bishop said.
Overall, Bishop said he expects to see improvement in the economy by the second half of this year.
“It probably won’t be a sharp bounce back as in a classic V-shaped recovery because there will be too many things still weighing on the economy,” Bishop said.
Bishop said he thinks an L-shaped recovery with years of stagflation is “pretty unrealistic, too” simply because there has been and will soon be a lot of money pumped into the economy with the federal stimulus package.
“From a policy standpoint, we can have an honest discussion about the oversight of that money, but it’s still out there” and it will help, he said.
He said the nation will experience a U-shaped recovery beginning in the second half of 2009, then improving in 2010.
And when the recovery comes, the housing market will be well positioned, Bishop said, citing low interest rates and pent-up demand from people who have wanted to buy property but have delayed that decision due to economic uncertainty.
Bishop said the federal stimulus package may also help the housing market. Realtors were hoping Congress would approve a $15,000 tax credit for home buyers. However, Bishop said that proposal is doubtful at this point. Now the real estate industry is hoping Congress approves a stimulus plan that includes eliminating the repayment feature of the first-time home buyer $7,500 tax credit. Realtors are also hoping Congress expands the $7,500 tax credit to all purchasers — not just those buying their first home.
Whatever the final stimulus plan holds, Bishop said it should boost the economy, with roughly $800 million in new spending being pumped into the system.
“All of this will have a positive effect, and the economy will pick up at some point,” he said.