NAR: Home sales and prices to climb into 2014

National Association of Realtors

The National Association of Realtors (NAR) announced this week that existing-home sales fell in October by 3.2 percent to 5.12 million, continuing a trend that began in September. That figure came as a surprise to economists, who had forecast monthly sales of 5.25 million, according to the USA Today.

While the short-term numbers are not encouraging, there’s reason to be optimistic as the calendar turns to 2014. At the 2013 Realtors Conference and Expo earlier this month, the NAR announced that existing-home sales and property prices are expected to increase into next year. This will continue the trend of monthly existing-home sales increasing, as they have been doing fairly steadily after hitting their nadir in early 2010.

For lenders, the connection should be apparent. More sales means more borrowers.

The only factor that could potentially hold back sales is a stagnation of incomes, which have only increased by 2 to 4 percent in the last two years, leaving affordability at a five-year low. Even so, the NAR expects prospective buyers to be “well positioned” to make purchases in the coming year.

“This is an incentive for banks to increase mortgage origination, especially considering the low default rates in recent years,” NAR chief economist Lawrence Yun said.

More sales may mean more borrowers, but more borrowers also means more risk for lenders. As the number of borrowers who apply for mortgages increases, so too will the number of high-risk borrowers.

If lenders do not have sufficient credit risk management tools in place, certain borrowers could slip through the cracks and, down the road, fall behind on their payments or slip into delinquency.

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