2006 Home Sales Slower, But Sustainable

NAR
Home sales this year are expected to stay below the peak levels in 2005 but will remain historically strong, according to the NATIONAL ASSOCIATION OF REALTORS®.

David Lereah, NAR’s chief economist, says the sales slowdown has already occurred. “Right now, home sales are a little lower than projected, but they can be sustained around current levels,” Lereah says. “Sometimes people lose sight of the fact that real estate is cyclical. Even so, sales will continue at a historically high pace with modestly higher interest rates as the year progresses, and 2006 is forecast to be the third-strongest year on record.”

Existing-home sales are likely to decline 4.7 percent to 6.74 million this year, down from a record 7.07 million units in 2005, while new-home sales are expected to fall 8.5 percent to 1.17 million from a record 1.28 million in 2005; both sectors would see their third-best year after the totals for 2005 and 2004. Housing starts are seen at 1.87 million units in 2006, down 9.3 percent from 2.06 million last year.

The 30-year fixed-rate mortgage should rise to 6.9 percent by the end of the year.
NAR President Thomas M. Stevens from Vienna, Va., says home sellers are making some adjustments. “It’s easy to understand that sellers have taken it for granted that it would be fairly easy to sell without much compromise during the recent sales boom,” says Stevens, senior vice president of NRT Inc. “Now that buyers have more choices, it’s even more important for sellers to seek advice from real estate professionals. Pros can recommend the right mix of improvements to maximize return, as well as bridge the differences between buyers and sellers that often arise in the negotiation process. Consumers should keep in mind that not all real estate professionals are REALTORS®, who subscribe to a strict Code of Ethics.”

The national median existing-home price for all housing types is expected to increase 5.0 percent this year to $219,200. At the same time, the median new-home price is projected to rise 5.7 percent to $250,900.

Inflation as measured by the Consumer Price Index is forecast at 3.1 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.9 percent this year.
Growth in the U.S. gross domestic product is seen at 3.4 percent in 2006. The unemployment rate should average 4.8 percent this year.

NOTE: Minor revisions to monthly seasonally adjusted annual sales rates for 2002 through 2004 will be made when the January existing-home sales report is released on Feb. 28. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the past three years based on the most recent findings.

Additionally, within the next two months, NAR will revise national and regional median existing-home price data back to 1999. The fixed reporting sample of representative multiple listing services has been updated to reflect geographic changes over time so that the monthly samples for regional price measurements are as accurate as possible. The changes in price patterns will be consistent with previously reported data.

Editor's Note: For more housing statistics, visit the Research section at REALTOR.org.