Many savvy real estate executives around the country aren’t dismayed by the prospect of a slower housing market this year after the unprecedented housing boom of recent memory.

Many savvy real estate executives around the country aren’t dismayed by the prospect of a slower housing market this year after the unprecedented housing boom of recent memory. In fact, many of these executives are even eagerly looking forward to quieter times that will allow them to regroup, rebalance and, at long last, perhaps even relax.

This positive outlook is a reasonable response to a “normalized” market that is characterized not by rapidly rising house prices, dozens of offers for every for-sale house and a frenetic pace of doing business, but rather by modest home price appreciation from year to year, negotiation between buyers and sellers and a manageable pace of business. Yet sadly, a lot of the good news about today’s housing markets has been buried in negativity about the outlook for the future as compared with the past. Here are some positive points to ponder:

Interest rates on 30-year fixed-rate mortgages appear to have stabilized for the time being in the 6 percent range while buyers who want to accept more risk can still obtain adjustable-rate and hybrid mortgages with interest rates in the 5 percent range. While each type of mortgage is now more costly than it has been in recent years, these rates are still attractive compared to historical levels. Longtime real estate practitioners who are still in business today haven’t forgotten when mortgage interest rates rose into double-digits and flexible alternatives to those sky-high fixed rates weren’t yet available.

The National Association of Realtors has predicted a modest slowdown in home sales for 2006, yet if the total number of homes sold comes in a year from now at or near the forecast of almost 6.8 million, that figure would still be the second-highest year on record after 2005, during which 7.1 million homes were sold. Any year in which Realtors sell more than 6 million homes should be a good year by historical standards, even if it doesn’t set a new record. Predictions are equally strong for new-home sales, which are also forecast to achieve near-best heights this year.

A modest decline in new-home sales from the record-breaking 1.3 million in 2005 to the forecast 1.2 million in 2006 may prompt builders to be slightly more conservative in their land purchases and inventories of unsold new homes. That trend would moderate the supply of new houses and keep builders in a strong competitive position. The consolidation of home builders into larger national companies also suggests a better ability for the sector to weather market changes.

Meanwhile, demographic trends are still highly favorable for housing. Seniors are aging in their longtime homes and purchasing residential properties as investments. Baby Boomers are trading up to more costly homes and buying second and vacation homes while younger generations are discovering the values of home ownership. Minorities and recent immigrants are also eager and able to own their own homes. A preference among many buy-and-hold investors for real property over other financial instruments also fuels the housing markets and bodes well for the future of housing.

Businesses added more than 2 million jobs to the national economy last year and NAR has forecast a national unemployment rate of 4.8 percent for the end of this year. Those trends are also positive for housing, although employment gains and losses vary widely from one city to the next around the country. Cities that are adding employment opportunities are good environments for housing because good-paying jobs enable first-timers to buy entry-level homes and help existing homeowners make their mortgage payments and trade up to pricey homes. Personal income growth is also a potential cushion against higher monthly payments on adjustable-rate mortgages.

The massive amount of home remodeling that has occurred in recent years has upgraded and modernized the nation’s housing stock in many places and contributed to higher house values. All this remodeling also could be a prop for house prices as long as buyers continue to demand larger homes and more modern conveniences.

Not all the news is good, of course, yet these and other factors add up to an overall positive outlook for the new year. What’s more, slower housing markets could allow real estate brokers and agents seemingly lost-lost opportunities to strengthen their businesses for the long term through improved customer service practices, increased education and professionalism, and the adoption of more efficient technologies. That’s good news too for practitioners and the health of the industry overall.

Marcie Geffner is a real estate reporter in Los Angeles.


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