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Historically Strong Home Sales Expected in 2006
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RISMEDIA, Dec. 13 — 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 Association of Realtors®.
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% during the second half of 2006.
Existing-home sales, expected to rise 4.7% to 7.10
million this year, are likely to decline 3.7% in 2006 to 6.84 million. New-home sales, projected to increase 7.0% to 1.29 million this year, are forecast to drop 4.8% to 1.23 million in 2006 - also the second best on record.
Total housing starts for 2005 should grow 5.8% to 2.06 million units, the highest since 1972, and then decline 4.8% 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% to $208,800 for 2005, is expected to rise another 6.1% in 2006 to $221,400. The median new-home price is likely to rise 5.5% to $233,100 in 2005, and then grow by 7.3% next year to $250,100 as higher construction costs impact the market.
The U.S. gross domestic product should grow 3.7% for 2005 and 4.1% next year. The unemployment rate is expected to
decline to 4.9% by second quarter of 2006, and then stabilize.
The Consumer Price Index is projected to rise 3.4% for 2005, and 2.9% next year. Inflation-adjusted disposable personal income is forecast to increase 1.4% in 2005 and 4.5% in 2006.
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