Each year, Inman News reports on what the major trade group economists are forecasting for real estate the coming year. Now we are looking back at what they told us last year to see how their original predictions played out.

Here’s a look at what the trade groups originally predicted was in store for 2005, compared with what each is now predicting for this year totals. We also include what the experts are now forecasting for 2006.

National Association of Realtors

With home sales holding at historically high levels, the National Association of Realtors expects “modest cooling” in the real estate market next year.

David Lereah, NAR’s chief economist, said strong demand should keep home sales at historically high levels in 2006. “We are in the process of setting a fifth consecutive annual record for both existing- and new-home sales, but the market will be coming off of a five-year boom and experience a soft landing next year,” Lereah said.

The chief economist said that an uptrend in mortgage interest rates will cause some slowing of the sales pace, but NAR forecasts 2006 to be the second highest year on record and that housing will continue to support the overall economy.

Mortgage Bankers Association

Doug Duncan, chief economist for the Mortgage Bankers Association, anticipates interest rates on the 30-year fixed-rate mortgage will rise to about 6.6 percent in 2006. Home prices will top those of 2005, rising to $218,100 for the median price of existing homes and $240,000 as the median for new homes, according to Duncan.

National Association of Home Builders

“We’re looking for a 5 or 6 percent decline in home sales next year, compared to 2005,” said NAHB Chief Economist David Seiders in November when the National Association of Home Builders/Wells Fargo Housing Market Index for November was released. “No huge drop (in demand) is in the cards,” Seiders said.

According to Seiders, it’s likely that “an orderly cooling process that will lead to somewhat lower home sales and production in the future” is underway.

California Association of Realtors

The California housing market is watched closely nationwide. This year, prices continued to rise, though the amount of inventory on the market started to increase in November.

“The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future,” said Leslie Appleton-Young, chief economist for the California Association of Realtors, in her housing market forecast for 2006.

“However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to home ownership will continue to push residents inland and even out of state,” the economist said.

The economist predicted that not all areas of the state would continue to experience the unprecedented double-digit median price increases of the past five years. “Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10 percent gain we expect for the state as a whole,” Appleton-Young said.

*CAR’s affordability index is the percentage of households able to afford a median-priced home.


Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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