Home Sales to Vary in Narrow Range, Then Rise in Second Half

Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5.

Lawrence Yun, NAR chief economist, said some pullback after a sharp increase in the previous month was expected. “The overall decline in contract signings suggests we are not out of the woods by any means. The housing stimulus bill that is still being considered in the Senate is critical to assure a healthy recovery in the housing market, jobs and the economy,” he said.

The PHSI in the West slipped 1.3 percent to 97.5 in May but is 2.0 percent higher than May 2007. In the Northeast, the index declined 2.9 percent to 77.0 in May and is 16.4 percent below a year ago. The index in the Midwest fell 6.0 percent to 78.6 and is 13.8 percent below May 2007. In the South, the index dropped 7.1 percent in May to 84.5 and is 22.1 percent below a year ago.

Yun said location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.”

Double-digit pending sales gains in May from a year ago were noted in Colorado Springs, Colo.; Sacramento, Calif.; and Spartanburg, S.C.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the current market offers immediate benefits and long-term value for many buyers. “Home buyers are getting a great deal right now,” he said. “Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009.”

Based on current indicators, the 30-year fixed-rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year, and then hold at that level for most of 2009. NAR’s housing affordability index is improving this year and is likely to rise 15 percentage points to 127.0 for all of 2008.

Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5.0 percent next year to 5.58 million.

“The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun said. “Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets.”

The aggregate median existing-home price is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.

New-home sales are likely to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000. “In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into 2009,” Yun said. Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9.0 percent in 2009 to 879,000.

The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.

Growth in the U.S. gross domestic product (GDP) is seen at 1.6 percent in 2008 and 1.4 percent next year. The unemployment rate should average 5.4 percent this year and 5.8 percent in 2009.

Inflation, as measured by the Consumer Price Index, is forecast at 3.7 percent this year and 2.4 percent in 2009. Inflation-adjusted disposable personal income is projected to grow 1.5 percent in both 2008 and 2009.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

DESA Heating Products to Expand Bowling Green Facility, Move Production Back from China

FRANKFORT, Ky. (July 15, 2008) - Governor Steve Beshear today joined company and community officials in Bowling Green to announce DESA Heating Products, LLC is moving manufacturing production from China back to its Warren County facility. The shift in operations will expand the company's Bowling Green workforce and create a capital investment of over $6.4 million in the commonwealth.

"DESA Heating Product's decision to move production back to Kentucky is a strong indicator of evolving outsourcing trends in the global economy," said Gov. Beshear. "We are delighted DESA will expand its Bowling Green facility to accommodate the added production, resulting in a multi-million dollar investment and several hundred new employment opportunities for the south central Kentucky region."

"The Cabinet is pleased to work with DESA Heating Products and the Bowling Green community to make this expansion possible," said Economic Development Cabinet Secretary John Hindman. "Kentucky's central location, coupled with our logistical advantages and productive workforce, make it ideal for companies relying on shipping products to customers across the globe."

Over the last year DESA has begun bringing back a significant percentage of its manufacturing from China, due to changing times in the world economy. Factors such as the continuing rise in the cost of oil, the weakening of the U.S. dollar compared to foreign currency and the recent rise in wages for Chinese workers is making manufacturing in China no longer as economical as it once was.

The continuing spikes in the cost of oil are making transportation increasingly expensive, especially for larger, heavier products such as the consumer and professional heaters that DESA produces. Bowling Green's centralized location will not only allow DESA to save on transportation costs, but will expedite the shipping process. The company now can ship products to over half of the U.S. in about one day compared to the average six to eights weeks timeframe to ship from China.

"Bowling Green, Kentucky is an ideal location for DESA Heating Products' expansion because we are located within a day's drive of 70 percent of the U.S. population, we have a large labor base with whom we have a very solid relationship, and we enjoy a low overall cost of doing business here," said Claude Hayes, president of retail heating for DESA.

"Our production team has also made a great impact in helping us to reduce costs and produce superior quality," continued Hayes. "Our team expects quality, and that expectation has helped us raise the bar in producing the best quality products with the highest level of efficiency. Our sales team has now spread our product base to most major retailers."

DESA currently employs 450 Kentuckians at its 250,000 square-foot Bowling Green plant. The company will make improvements to its existing facility, as well as add building fixtures and new equipment to accommodate the expansion.

"Our superior relationship with our workforce has been integral to our decision to expand. The partnership we have with Sheet Metal Workers Local 433 has enabled us to focus on our total quality initiative and given us the advantage of having the most productive labor force for our type of products in the nation," added Hayes.

"I'm proud that Bowling Green-Warren County is home to DESA Heating Products, LLC, one of the world's leading manufacturers of heating products used in homes and at job sites across the globe," said Warren County Judge Executive Michael Buchanon. "This expansion is not just great because of the hundreds of jobs being brought back to Kentucky, but also because it demonstrates the quality of our workforce and how a dynamic company like DESA can successfully compete at an international level."

"Today is another great day in Bowling Green as DESA makes this announcement," said Bowling Green Mayor Elaine Walker. "They have played a major role in our community and have been a great corporate citizen throughout their tenure in Bowling Green. It's exciting to know that the only USA-manufactured line of heating products are made right here in Bowling Green, and that is a truly impressive statement about the quality of the product and the commitment of DESA to our region."

Bowling Green Ranked as One of Best Small Places for Business and Careers

BOWLING GREEN, KY-Bowling Green has been recognized once again for its positive business environment. Forbes Magazine recently released its list of Best Small Places for Business and Careers on www.forbes.com. Bowling Green was listed as No. 12.

Forbes determined these rankings based on cost of labor, energy, taxes and office space. Listings included rankings on cost of doing business, job growth, educational attainment and metropolitan area size. In terms of population, the list included metro areas ranging from 56,000 to 239,000. 2008 marks the 10th annual release of these rankings by Forbes.

To learn more about Forbes' rankings, visit http://www.forbes.com/lists/2008/5/bestplaces08_Best-Small-Places-For-Business-And-Careers_Rank.html.