Existing-home sales are forecast to fall 6.5 percent this year to 6.61 million, which is the third-highest year on record after 2005 and 2004, the National Association of Realtors reported today in its latest annual forecast.

New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts are expected to drop 9.1 percent this year to 1.88 million.

The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory, according to the trade group’s forecast.

David Lereah, NAR’s chief economist, said in a statement, “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts. New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.

“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” he also said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”

The forecast calls for fairly steady sales for the remainder of the year, though declines since last fall mean annual totals will be lower.

The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago and is expected to reach 6.9 percent in the fourth quarter.

Thomas M. Stevens, NAR president and senior vice president for NRT Inc., said in a statement, “The rise in housing supply is the biggest change in the market over the last year. Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers.”

The unemployment rate is expected to average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3 percent this year.

Existing-home sales for July will be released Aug. 23; the Pending Home Sales Index is scheduled for Sept. 1 and the next forecast will be released Sept. 7.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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