NEW YORK — The real estate scene may not be quite as hip and exciting to talk about this year, with economists and industry insiders agreeing that markets have hit a slowdown.

But don’t count on negative news either; experts predict home sales will continue to boom and prices will continue to rise, though at a much calmer pace. In a nutshell, as long as the overall economy is sailing along, housing will continue to do just fine.

“When the dust settles in 2006, I think the overall growth will be less than in 2005, but will be less volatile,” Jonathan Miller, president and CEO of Manhattan-based Miller Samuel, said during a panel discussion at Real Estate Connect in New York last week.

Miller’s firm collects real estate data for the Manhattan market, which recently showed a 27.2 percent drop in sales in the fourth quarter 2005 and a 20.3 percent increase in average prices.

The first half of 2005 saw a significant run-up in prices, Miller noted, stimulated by a record low level of inventory at the end of 2004.

While many analysts and economists have used the term “normalizing” to describe the slowing of some markets, Miller said he hesitates to use that word. “I hate the word ‘normal’ because frankly I don’t know what normal means anymore,” he said, referring to the robust markets of recent years with double-digit gains in home-price growth.

The drop in sales volume at the end of 2005 was caused by negative economic news associated with the Gulf Coast hurricanes, a spike in oil prices, and the war in Iraq, Miller said.

But there was an uptick in Manhattan real estate activity in December, Miller said, caused in part by the start of Wall Street bonus season, which is closely linked with the Manhattan real estate market and accounting for a large portion of luxury sales each year. In Manhattan, “there’s always a direct correlation between Wall Street and real estate,” he said.

Miller expects growth in the first half of 2006 as well. “In the first half of the year we’re going to see an uptick in the number of transactions and an uptick in (price) appreciation, but not the double-digit growth we’ve become acclimated to,” he said.

However, that all depends on how the overall economy performs, he said.

Amy Crews Cutts, deputy chief economist for mortgage buyer Freddie Mac, expects the housing market to slow nationally, changing things for industry professionals this year. “Folks with their licenses are going to have to earn their money; it’s not just going to fall in their lap,” she said.

Crews Cutts pointed to the job market as a barometer to watch. She cautioned that job loss historically has been the trigger in collapsing local housing markets, such as in California in the 1990s.

Two markets she’s concerned about today include small towns in Ohio and Michigan where many people have lost jobs, triggering an increase in real estate foreclosures.

Crews Cutts also said she is worried about oversupply in a few hot condo markets such as Las Vegas and Miami. “I’m worried because where are you going to put these condos over next few years? There are million-dollar condo lofts on the (Las Vegas) strip and where are you going to find these buyers? Everyone is not out there trying to buy million-dollar condo second homes,” she said.

Panelists last week agreed that the housing bubble analogy used by the media to characterize the incredible activity and price increases throughout the nation in the last few years is a misleading term. “Bubbles” imply busts, and while the experts predict a slower market, they don’t anticipate a crash.

“I think there are adjustments — we’ll moderate,” said Gary Kenline, senior vice president of Hunt Real Estate ERA. “We need to get that bubble concept out of the way.”

Real estate activity was “nuts” in the first half of 2005, he said, which sparked the bubble conversations.

Hugh Kelly, associate professor at New York University and founder of Hugh Kelly Real Estate Economics, cautioned home buyers in looking ahead: “You should buy your house because it’s a great place to live,” he said, not as a speculative investing vehicle.

In dealing with a slowing market, lenders too should be careful not to take every deal that walks through the door, Kelly said. Lenders need to finance conservatively to protect from getting buried in risk.


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