Home Prices Correcting, Buyers Returning to the Market
Home sales appear to be bottoming out with lower prices attracting
buyers in many areas of the country, says NAR
RISMEDIA, October 13, 2006—David Lereah, NAR’s chief economist, said the housing market is showing signs of life and that sales may be leveling out. “Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices,” Lereah said. “Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year.”
Existing home sales are forecast to be fairly stable in the fourth quarter and sales for all of 2006 are expected to drop 8.9% to 6.45 million – still the third strongest year after consecutive records in 2004 and 2005. New-home sales are forecast to fall 17.3% this year to 1.06 million, the fourth highest year on record. Housing starts should be down 10.9% to 1.84 million in 2006.
With a recent correction in the market, the national median existing home price is likely to rise 1.6% to $223,000 for all of 2006; it’s anticipated prices will remain slightly below year-ago levels before gaining positive traction in the first quarter of 2007. The median new home price is projected to decline 0.2% to $240,500 – largely the result of builder price cuts to move unsold inventory.
NAR President Thomas M. Stevens from Vienna, Virginia, said this presents a unique opportunity for buyers. “The supply of homes on the market is the highest we’ve seen in over 13 years, and mortgage interest rates are experiencing an unexpected decline,” said Stevens, senior vice president of NRT Inc.
“The 30-year fixed rate is hovering around 6.3 percent, and sellers in most of the country are now showing a willingness to negotiate,” said Stevens. “While this changing market is a great time to buy, it’s become increasing important for parties on both sides of the real estate transaction process to have professional representation.”
The 30-year fixed-rate mortgage will probably average 6.5% in the fourth quarter but will trend up modestly in 2007.
The unemployment rate should average 4.8% in the fourth quarter.
Inflation, as measured by the Consumer Price Index, is expected to
be 3.4% for all of 2006, while growth in the U.S. gross domestic product
is forecast at 3.3%. Inflation-adjusted disposable personal income
is likely to grow 3.4% for 2006.