NAR: Home sales to stabilize in months ahead
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WASHINGTON -- July 12, 2006 -- Home sales are projected to ease modestly but should stay within a relatively narrow range over the balance of the year, according to the National Association of Realtors® (NAR).
David Lereah, NAR’s chief economist, says the market shows signs of stabilizing. "The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels," he says. "At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don’t look for any big shifts one way or the other."
Existing-home sales are expected to decline 6.7 percent to 6.60 million in 2006 from 7.08 million last year. That would still be the third highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.
The 30-year fixed-rate mortgage is likely to reach 7.0 percent by the end of the year.
"The uptick in interest rates has been slowing home sales," Lereah says. "We remain concerned about the potential impact of higher interest rates in some of the more expensive areas of the country."
NAR President Thomas M. Stevens says consumers who have been on the sidelines should feel more confident about the market normalization. "When it comes to big ticket purchases, buyers are more comfortable in a stabilizing environment," says Stevens. "At the same time, home sellers in most areas understand that the period of abnormal price growth is over, and they have become more realistic about the current market. This is helping to ease the pressure on home prices in some areas."
The national median existing-home price for all housing types is expected to rise 5.3 percent to $231,300 in 2006. With more construction in lower cost regions as well as price incentives that are helping to clear unsold inventory, the median new-home price should increase 1.0 percent this year to $243,300.
The unemployment rate is projected to average 4.7 percent in 2006, while inflation, as measured by the Consumer Price Index, is forecast at 3.4 percent. Growth in the U.S. gross domestic product is expected to be 3.4 percent this year, and inflation-adjusted disposable personal income is likely to grow 3.1 percent.
© 2006 FLORIDA ASSOCIATION OF REALTORS