Modest 1.5 Percent Growth Predicted For U.S. Home Prices In ‘06; Many Markets In Decline

If you’ve recently invested a lot of money under the assumption that certain booming real estate markets would continue to rise this year, CNN Money reports that you may find yourself on the losing end of a bet you thought was safe.

According to housing price forecasts from Fiserv Lending Solutions, a provider of mortgage and consumer lending services, Las Vegas real estate will tumble a whopping 8.2 percent in 2006, the largest predicted fall among 379 metro areas studied. Many markets will decline in value, with many California real estate markets leading the way in this undesirable category. The list includes San Diego (dropping 4.0 percent), San Francisco (falling 1.9 percent) and Los Angeles (down 3.o percent).

Fiserv forecasts only a modest 1.5 percent increase in U.S. median home prices this year overall. Many metro areas — including the nation’s biggest — will experience stagnation, if not slight declines.

That includes the biggest of them all, the Big Apple. Metro New York real estate is projected to decrease in value by 2.43 percent, while the Washington, D.C. area is expected to fall 1.9 percent. Boston is headed for a 1.3 percent decline, and Philadelphia is predicted to grow by a mere 0.8 percent. Denver is targeted for a 2.8 percent increase, and Phoenix, one of the fastest-growing areas in the country in recent years, will slow down a bit to just 3.3 percent.

Some metro areas that have lagged over the past few years, meanwhile, may begin to regain ground. Leading the way in this category is Texas real estate. Houston, with a modest $145,000 median home price, is expected to grow by 6.1 percent, and San Antonio (with a median price of $138,000) should do even better at 8.3 percent. The Dallas-Fort Worth area is slated for between 6 and 7 percent growth, and Memphis ($129,000) should see up to 7.8 percent appreciation.

Cooler, smaller markets in the Northeast are also expected to rebound. Rochester, N.Y., and Binghamton, N.Y., where median homes average only $100,000-120,000, should see prices rise more than 8 percent. Scranton, Pa., will increase 7.6 percent.

Most importantly, for those interested in Florida home loans, are the Sunshine State’s forecasts. Let’s just say that North Florida is looking sunniest, with a steady 6.9 percent median price bump projected for Jacksonville real estate. Tallahassee is poised for 7.8 percent growth and Gainesville 5.7 percent. The burgeoning Orlando real estate market and its surrounding areas look strong, with no numbers suggesting major market corrections.

Some South Florida real estate markets figure to take a hit this year, but relatively minor ones that have been anticipated on the heels of incredible annual growth. Naples real estate, which grew in value by more than 44 percent a year ago, will increase by only 1.5 percent this year. Miami real estate, along with nearby Ft. Lauderdale and Palm Beach, grew by more than 30 percent in 2005. This year, prices should fall by as much as 2.5 percent, Fiserv projects.

With Florida home loan rates still low, and prices finally reaching a plateau, this could be a good opportunity for new buyers. Just beware properties priced above where you think they should be. Sellers could still be expecting the kind of returns people were getting last year, and may be reluctant to drop their asking price. Remember, patience is a virtue!