WASHINGTON -- Aug. 9, 2006 -- The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors (NAR).
David Lereah, NAR’s chief economist, says the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he says. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”
“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah adds. “This means many potential homebuyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”
Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.
The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.
NAR President Thomas M. Stevens says current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” says Stevens. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns -- but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”
The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.
The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.
© 2006 FLORIDA ASSOCIATION OF REALTORS
