Home sales should generally level-out and remain at historically high levels, according to the National Association of RealtorsÆ.
David Lereah, NAR’s chief economist, said mortgage interest rates are trending up but will remain favorable. “Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect,” Lereah said. “Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record.” He expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year.
Growth in the U.S. gross domestic product is forecast at 3.7 percent in 2006, while the unemployment rate should average 4.8 percent.
Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year – both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.
NAR President Thomas M. Stevens from Vienna, Va., said home prices are expected to cool, but not as much as in earlier projections. “Although housing inventories have been improving, the balance is still a bit more favorable for sellers and annual appreciation remains in double-digit territory,” said Stevens, senior vice president of NRT Inc. “Even so, the market is in a process of normalization – appreciation will return to normal single-digit patterns, providing solid investment returns into the future.”
I find this a little insulting. It is obvious that despite being the “third strongest year on record” we are down from 2005 and 2004. Of course the NAR and other similar entities want to maintain the appearance of a strong housing market, but I’m not sure why everyone is so reluctant to admit that the housing market is softening.
At least the NAR acknowledges a “normalization” of the housing markets which is much more on par with reality.
That said, in NYC the most affected properties are those without “special” characteristics–such as a sought after location, a spectacular view, private outdoor space, pristine renovations, or other factors–that reassure buyers their purchase will hold value.