The National Association of Realtors trade group has lowered its expectations for existing-home sales in 2006, according to an announcement today. Existing-home sales are expected to drop 5.7 percent this year compared to 2005, with a forecast of 6.67 million existing-home sales this year compared to a record 7.08 million existing-home sales last year.
Meanwhile, the association has improved its forecast for new-home sales and housing starts since the previous forecast in February, though these categories are also projected to be lower this year than they were in 2006.
New-home sales are forecast to fall 7.7 percent this year to 1.18 million from a record 1.28 million in 2005, the association reported, and housing starts are forecast to fall 4.3 percent this year to 1.98 million. In February, the association forecast 1.17 new-home sales and 1.87 million housing starts for the year.
David Lereah, NAR’s chief economist, said in a statement, “The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they’ve seen in the last five years. Annual price-appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year.”
The national median existing-home price for all housing types is projected to rise 5.8 percent in 2006 to $220,300. The median new-home price should increase 5.4 percent this year to $250,200, the association announced.
Thomas M. Stevens, president of the association and senior vice president of NRT Inc., stated, “Some sellers in markets that have had rapid appreciation are listing the price of their home too high, but those homes are just languishing on the market. At the same time, some buyers who have believed hype about a housing bubble are hoping prices will drop, but that’s not happening either. Today’s market has changed a lot from the conditions we’ve seen during the last five years.”
The 30-year fixed-rate mortgage should increase gradually to 6.9 percent in the fourth quarter, the association also reported. Inflation as measured by the Consumer Price Index is projected at 3.3 percent this year. Inflation-adjusted disposable personal income is expected to grow 3.7 percent in 2006.
Growth in the U.S. gross domestic product is forecast at 3.5 percent in 2006, while the unemployment rate is seen to average 4.8 percent this year.
The association also reported that it will soon revise national and regional median existing-home prices 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,” the trade group noted.
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