Existing-home sales are expected to drop 6.4 percent this year to 6.62 million, down from a record 7.08 million in 2005, according to the latest annual forecast by the National Association of Realtors trade group.
The projected sales total would be the third highest on record. The forecast also calls for new-home sales to drop 11.6 percent to 1.13 million from a record 1.28 million in 2005. Housing starts are expected to fall 5.4 percent to 1.99 million compared to the 2005 total.
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, the group announced.
The Realtor association's sales expectations for the real estate market have lowered since the start of the year. In January the group predicted that existing-home sales would be 4.4 percent lower this year than in 2005, with new-home sales declining 6 percent. The group expected housing starts to drop 6.6 percent this year.
The group's forecast in January called for the median existing-home price to rise to $219,700 this year and the median new-home price to reach $245,200.
David Lereah, NAR's chief economist, said in the association's announcement today, "Coming off a prolonged period of record sales, housing is taking something of a breather this year. 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 said he expects the 30-year fixed-rate mortgage to rise to 7 percent this summer and hold at that level during the second half of the year. In January, the group's forecast called for the 30-year fixed-rate mortgage to reach 6.7 percent.
The unemployment rate is expected to average 4.7 percent this year, 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.
Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said in a statement, "Since the supply of homes on the market has improved to roughly balanced levels, overall home-price appreciation has cooled to single-digit rates. 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."
Inflation as measured by the Consumer Price Index is projected at 3.4 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.4 percent this year, the association announced.
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