A Slower, Yet Still Strong, Housing Market Expected in ‘06
Third. Best. Year. Ever.
It doesn’t have a wonderful ring to it, but this prediction - courtesy of the National Association of Realtors - is still better than what many real estate insiders had feared for 2006. David Lereah, NAR’s chief economist, says the market is adjusting to higher mortgage interest rates.
“Coming off a prolonged period of record sales, housing is taking something of a
breather this year,” he says. “Even so, interest rates remain historically low, we’ve added about 2 million jobs over the last 12 months and the economy continues to grow – that will sustain healthy levels of home sales in 2006, but they’ll stay below the peaks experienced during the last two years.”
Lereah forecasts the 30-year fixed-rate mortgage to rise to 7.0 percent this summer and hold at that level during the second half of the year. The unemployment rate is expected to average 4.7 percent (compared with 5.1 percent in 2005) while growth in the U.S. gross domestic product is seen at 3.5 percent in 2006, the same as last year.
Existing home sales are likely to fall 6.4 percent in 2006 from a record 7.08 million last year. New home sales, meanwhile, are projected to drop 11.6 percent from last year’s record of 1.28 million. Housing starts should decline 3.7 percent this year compared with 2.07 million in 2005.
NAR President Thomas M. Stevens says home prices are returning to normal patterns.
“Since the supply of homes on the market has improved to roughly balanced levels, overall home price appreciation has cooled to single-digit rates,” says Stevens. “Most of the country is now entering a period of equilibrium in the housing market, which is good for the long-term health of the sector. Owners in most areas can now expect steadier and more normal rates of return on their housing investment.”
The national median existing home price for all housing types is expected to rise 5.7 percent this year to $232,200, while the median new-home price is forecast to increase 2.2 percent to $242,500. As this occurs, owners can look to make a bit more off Florida home mortgage loan deals. It resembles a buyer’s market at the moment as values remain low.
