NAR: Existing home sales poised for 10-year high; 'sluggish' housing starts impede recovery

Dive Brief:

Despite ongoing inventory and affordability concerns, small bank lending problems, and student loan debt hindering homeownership, the National Association of Realtors expects 2016 to be the strongest year for existing home sales since 2006.
NAR Chief Economist Lawrence Yun said during the association's Legislative Meeting event Thursday that although the housing recovery hasn't reached "robust" levels, he predicts existing home sales will reach 5.4 million this year, and median existing home prices will rise 4.5%.
Sen. Elizabeth Warren (D-MA), also speaking during the event, emphasized the need for student loan reform, as student debt can create a major obstacle to homeownership for potential buyers. She said reform can "breathe new life into housing markets."

Dive Insight:

The overall market's slow progress is largely due to the new homes sale segment, which is affected by "sluggish" housing starts, Yun said. He focused on the nation's increasingly tight inventory and encouraged homebuilders to ramp up production of starter homes.

Yun acknowledged, however, that builders have to deal with significant regulation costs when building new homes. A recent National Association of Home Builders study found that an average of 24.3% of a home’s final selling price is made up of local, state and federal regulatory costs.

"(Homebuilders are) completely leaving out the starter-sized homes," Yun said. "As a result, new home prices are rising faster than existing sales. Inventory is very low, implying that homebuilders need to produce more. Or maybe community banks need to lend more, perhaps by easing regulations."

He cited Dodd-Frank reforms as a possible remedy for the lack of new home construction, as the legislation has affected banks of all sizes. "Much of the lending for single-family housing starts historically has been among the community bank and the smaller-sized banks," he said. "Smaller banks are hindered by this massive new regulation. Now they are frozen, and they are not making those loans."

Warren's call for support for her student loan refinancing bill was met with applause from the audience of Realtors, as she referenced the seven out of 10 college graduates who take out loans for higher education, and then must pay back that money for years at high interest years. She said the industry should support student loan reform if it wants "to see more young people live the dream of homeownership."