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The key word for the housing market in 2006 is balance, with a return
to a more normal rate of price growth, according to the National
Association of Realtors®.
David Lereah, NAR’s chief economist, said current trends in the
housing sector are healthy. “We don’t need to break a record every
year for the housing market to be good – in fact, cooling sales are
necessary for the long-term health of this vital sector,” Lereah said.
“A modest slowdown in home sales, coupled with improvements in housing
inventory, means the market is in the process of normalization. That will
help to bring balance between home buyers and sellers, yet sales will
remain historically strong.”
After setting a fifth consecutive annual record, projected to 7.10
million units for 2005, existing-home sales are forecast to ease by 4.4%
to 6.79 million this year, which would be the second highest on record.
New-home sales, which should be a record 1.29 million for 2005, are
expected to decline 6.0% to 1.21 million in 2006 – that also would be
the second best year in history. Total housing starts for 2005 are seen at
2.07 million units – the highest since setting a record 1972 – with a
6.6% slowing to 1.94 million this year.
“A lot of demand has been met over the last five years, and a modest
rise in mortgage interest rates is causing some market cooling. Along with
regulatory tightening on nontraditional mortgages, there will be fewer
investors in the market this year,” Lereah said. The 30-year fixed-rate
mortgage is likely to trend up gradually to 6.7 percent during the second
half of the year. “This will preserve generally favorable affordability
conditions and keep the housing market at a more sustainable sales pace.”
NAR President Thomas Stevens said price appreciation should be at more
normal levels across most of the country. “Buyers are no longer
competing for a tight supply,” said Stevens. “That means home prices
generally will rise much closer to long-term norms, which is the overall
rate of inflation plus one or two percentage points. Lower price
appreciation will keep the door open to first-time buyers while preserving
the investment advantages of homeownership for sellers.
The national median existing-home price for all housing types,
projected to jump 12.9% to $209,100 for 2005, is forecast to rise 5.1% to
$219,700 this year. The median new-home price, which should be up 4.6% to
$231,300 for 2005, is expected to increase 6.0% this year to $245,200.
Inflation as measured by the Consumer Price Index is projected to rise
3.4% for 2005 and 3.0% in 2006. Inflation-adjusted disposable personal
income is forecast to increase 1.3% for 2005 and 4.6% this year.
Growth in the U.S. gross domestic product is likely to be 3.6% for
2005, with GDP seen at 4.0% this year. The unemployment rate is expected
to drop to 4.8% by the end of the year.
Source: National Association Of Realtors
Jan 10 2006 |
