Home price appreciation is moderating to more consistent long-term annual gains, replacing the pendulum swings of recent years that resulted in large ups and downs, according to realtor.com®’s Chief Economist Jonathan Smoke.

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However, “on the sales side, we are not back to normal,” Smoke told HousingWire in a recent interview. “And the lack of normal activity for six years and counting means that we have substantial pent-up demand waiting for all of the catalysts to enable that activity. That means we can look forward to several years of solid growth in sales of existing and new home sales.”

But Smoke said that the loosening of mortgage credit is critical to unleash that pent-up demand. “Some would-be buyers have been held back by subpar economic conditions, and with the economy solidly on track for more jobs, higher incomes, and more household formations, we will see the first wave of pent-up demand causing transaction volumes to grow,” Smoke said. But the big question remains of when that credit box will open, he said.

“Credit access is the key catalyst for early 2015,” Smoke said. “Limited credit availability through the overlays being added to mortgage qualification standards have not only limited demand, they have also limited supply. … If Ben Bernanke couldn’t qualify for a refinance, what does that say about his ability – and the ability of others – to sell and existing home and buy a new one?” 

If financing does loosen up, however, double-digit gains in transactions could be possible in 2015, he said. Regardless, “the more predictable trends – job growth, income growth, and household formation – mean more demand ahead, even if we see no movement in the credit box or lower down payment programs.”

Source: Housing Wire