The National Association of Realtors, in a statement released on Tuesday, said that housing sales and prices in 2006 will remain strong but will not achieve the record levels of 2005.
Sales of existing homes are expect to drop to 6.74 million this year, a decline
of 4.7 percent from the record high 7.07 million in 2005. New home sales will
be down 8.5 percent to 1.17 million, setting yet another 2005 record of 1.28
million. While sales will decline, it is still expected to be the third
best year for both existing and new home sales following last year
and the earlier record setting 2004. Housing starts are likely to be down 9.3
percent this year at 1.87 million units.
Even in the face of declining sales, prices are expected to continue their unprecedented spiral, although at a less spectacular rate. NAR projects that the median price for existing homes of all types including single family, townhouses, and condos is expect to increase 5 percent this year to $219,200 and the median price for new homes will be up 5.7 percent to $250,900. While this is well below the double digit price hikes seen in recent years, the rise in prices will still outstrip inflation which the Association expects will be up 3.1 percent this year as measured by the Consumer Price Index. Disposal personal income is expected to increase by 3.9 percent.
David Lereah, Chief Economist for NAR said in the report that the sales slowdown has already occurred. "Right now, home sales are a little lower than projected, but they can be sustained around current levels." He cautioned that people often 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 at the year progresses, and 2006 is forecast to be the third strongest year on record."
NAR predicted that the 30-year fixed-rate mortgage would rise to 6.9 percent by the end of the year. Freddie Mac, last month revised its prediction for the 30-year downward by 10 basis points to an average of 6.4 percent for the year.
The President of NAR, Thomas M. Stevens, used the new figures to advise sellers to return to the traditional real estate sales model. He stated "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. Now that buyers have more choices, it's even more important for sellers to seek advice from real estate professionals."
Got to keep those dues-paying members happy.
NAR will release January 2006 existing home sale figures on February 28 and will "fine-tune" month by month figures for the last three years at that time. The Association will also, within the next two months, revise national and regional median existing home price information back to 1999.