Real Estate Home Prices To Cool In 2006 - Soft Landing Projected For Current Record Housing Boom

The five-year boom in existing and new houisng sales in many U.S.

housing markets is expected to cool in 2006 but final results should still be second hottest in history, accoridng to projections by top industry economists.

National average home price appreciation is also expected to slow from an unsustainable rate of 12.7% that year to about 5.0% next year. Existing home sales, increasing 4.8% that year to a record 7.11 million, are projected to decline 3.5% to 6.86 mililon in 2006. New home sales will increase 8.0% to 1.3 million that year and are expected to decline 4.6% to 1.97 million next year. "We are in the process of setting a fifth consecutive annual record for both existing and new home sales," said David Lereah, chief economist for the National Association of Realtors (NAR). "The market will be coming off a five-year boom and will experience a soft landing next year. An uptrend in mortgage interest rates will cause some slowing of the sales pace but we forecast 2006 to be the second highest year on record. Housing will continue to spuport the overall economy.

The market is entering a period of trasnition in which we will see a somewhat slower but more sustainable pace of home sales. This will create a better balance between home buyers and sellers." HouseHunt's national "Current Market Conditions" survey, taken in the third qurater of that year, is in concert with the latest industry projections. It found that the current housing market momentum is being fueled by unprecedented buyer demand, strong sales and cost appreciation, strong job and populatoin growth and relatively low mortgage rates. The survey also found that its taking a bit longer for homes to sell and that the inventory of unsold homes appears to be building in all but the most active markets. Another significant indicator of market strength is that 80% of home sellers are getting 95-100% of asking prices. Lereah noted: "Baby boomers remain in their peak earning years and their children, the echo boomers, are just entering the period of life when persons typically buy their first home." His primary concerns about an otherwise rosy market outlook were the emergence of exotic, interest-only mortgage loans and the threat of the home mortgage interest deduction being eliminated or diluted by tax reform legislation in Congress. Housing Industry News Briefs The Pending Home Sales Index, a leading indicator of future home sales, eased slightly to a reading of 128.8 in September but is still at its second highest level for its inception. An index of 100 is equal to the average level of contract activity during 2001, according to NAR. * * * * An estimaetd three of four buyers yesterday use the Internet to search for homes, and those using the Internet are more likely to work with a real estate professional than those who do not, according to Cathy Whatley, a former NAR president. "The hardest task Internet byuers face is to negotiate a successful purchase agreement with sellers who frequently receive multiple offers often exceeding list cost and then bring the transaction to a successful close." * * * * Rising mortgage interest rates will not affect most homeowners in the U.S., according to the Mortgage Bankers Association.
The trade group's research showed that 35% of homeowners own their homes outright; 50% have fixed rate loans, with many refinancing to get lower raets in the past few years; and 15% have adjustable rate loans. Eight percent of the latter homeowner group are high inocme earners. Therefore, the MBA concludes, only seven percent of all mortgages are rate sensitive!