The National Association of Realtors trade group has lowered its expectations for annual home sales in 2006.

Existing-home sales are forecast to fall 7.6 percent this year to 6.54 million, while new-home sales are forecast to drop 16.1 percent to 1.08 million compared to the previous year.

In the group’s previous annual forecast, released Aug. 8, existing-home sales were expected to fall 6.5 percent this year while new-home sales were projected to fall 12.8 percent.

If the latest forecast rings true, it would be the third-highest existing-home sales record on total and the fourth-highest total for new-home sales.

Housing starts are projected to decline 9.6 percent to 1.87 million in 2006, compared to the August projection of a 9.1 percent decline.

The market is experiencing “an inventory and price imbalance,” the Realtor group reported.

David Lereah, NAR’s chief economist, said in a statement, “A year ago we had record home sales and tight supply with buyers bidding over the asking price. This year sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we’ll probably see prices dip temporarily below year-ago levels as the market works through a buildup in housing inventory.”

He added, “Home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms. “Over time, home prices rise at the rate of inflation plus 1 to 2 percentage points — buyers in most of the country who plan to stay in their home for a normal period of home ownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned.”

The national median existing-home price for all housing types is expected to grow 2.8 percent this year to $225,900, with the median new-home price rising 0.2 percent to $241,400. “New-home appreciation is dampened by builders offering incentives to reduce inventory,” according to the forecast announcement.

Thomas M. Stevens, NAR president, said in a statement that higher interest rates slowed home sales during the first half of the year. “The slowdown occurred mostly in higher-cost markets, while other areas continued to expand,” Stevens said. “The shift we’ve seen lately results from psychological factors with buyers on the sidelines trying to time the market. Both buyers and sellers need to understand what’s going on within their local market areas.”

The 30-year fixed-rate mortgage is expected to rise to 6.7 percent in the fourth quarter, according to the forecast.

The unemployment rate is expected to average 4.8 percent for 2006, while annual inflation, as measured by the Consumer Price Index, is forecast at 3.5 percent. Growth in the U.S. gross domestic product is expected to be 3.4 percent this year. Inflation-adjusted disposable personal income is projected to grow 3.5 percent in 2006.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription