Forecast 2006: Historically Strong Home Sales, says NAR
by Realty Times Staff
Historically Strong Home Sales Expected in 2006
WASHINGTON (December 12, 2005) – The housing market for 2005 is headed
for a fifth consecutive annual record, and sales activity in 2006 is
expected to be the second best year in history, according to the National
®.
David Lereah, NAR's chief economist, said that market conditions are
still favorable for housing. “The slowdown amounts to a tapping of the
brakes on a hot market,” said Lereah. “Home sales are coming down from
the mountain peak, but they will level-out at a high plateau – a plateau
that is higher than previous peaks in the housing cycle. This transition
to a more normal and balanced market is a good thing.”
The 30-year fixed-rate mortgage should trend up modestly and reach 6.6
percent during the second half of 2006.
Existing-home sales, expected to rise 4.7 percent to 7.10 million this
year, are likely to decline 3.7 percent in 2006 to 6.84 million. New-home
sales, projected to increase 7.0 percent to 1.29 million this year, are
forecast to drop 4.8 percent to 1.23 million in 2006 – also the second
best on record. Total housing starts for 2005 should grow 5.8 percent
to 2.06 million units, the highest since 1972, and then decline 4.8 percent
to 1.92 million next year.
NAR President Thomas M. Stevens from Vienna, Va., said that housing has
always been the soundest investment for most families. “As the old saying
goes, homeownership beats the heck out of a drawer full of rent receipts,”
said Stevens, senior vice president of NRT Inc. According to the Federal
Reserve Survey of Consumer Finances, the median net wealth of a homeowner
household is 36 times higher than a renter household.
Stevens said that the national median home price has never declined since
good recordkeeping began in 1968. “Although there can always be a temporary
decline in a given area if jobs are weak and there is an oversupply of
homes on the market, people who stay in their homes for a normal period
of homeownership generally see healthy returns over time. There are no
guarantees, but there are very good odds.”
The national median existing-home price for all housing types, which
is experiencing a surge estimated at 12.7 percent to $208,800 for 2005,
is expected to rise another 6.1 percent in 2006 to $221,400. The median
new-home price is likely to rise 5.5 percent to $233,100 in 2005, and
then grow by 7.3 percent next year to $250,100 as higher construction
costs impact the market.
The U.S. gross domestic product should grow 3.7 percent for 2005 and
4.1 percent next year. The unemployment rate is expected to decline to
4.9 percent by second quarter of 2006, and then stabilize.
The Consumer Price Index is projected to rise 3.4 percent for 2005, and
2.9 percent next year. Inflation-adjusted disposable personal income
is forecast to increase 1.4 percent in 2005 and 4.5 percent in 2006.
The National Association of Realtors ® , “The Voice for Real Estate,”
is America's largest trade association, representing more than 1.2 million
members involved in all aspects of the residential and commercial real
estate industries.
Existing-home sales data will be released December 29; the next forecast is scheduled for January 10; and the Pending Home Sales Index will be January 5.