by Calculated Risk on 3/13/2006 02:02:00 PM

The National Association of Realtors reports: Housing Market Readjusting to Normal Balance.

A lower level of home sales expected this year will create a more level playing field for buyers and sellers on the heels of a five-year sellers’ market, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the number of homes on the market has been improving nicely. "The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they’ve seen in the last five years," Lereah said. "Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year."

The national median existing-home price for all housing types is projected to rise 5.8 percent in 2006 to $220,300. The median new-home price should increase 5.4 percent this year to $250,200.

Existing-home sales are expected to fall 5.7 percent to 6.67 million in 2006 from the record 7.08 million last year. At the same time, new-home sales are forecast to decline 7.7 percent to 1.18 million from a record 1.28 million in 2005 – each sector would be at the third highest year following the tallies for 2005 and 2004. Housing starts are likely to total 1.98 million this year, down 4.3 percent from 2.06 million in 2005.

NAR President Thomas M. Stevens from Vienna, Va., said some home buyers and sellers have unrealistic expectations. "Some sellers in markets that have had rapid appreciation are listing the price of their home too high, but those homes are just languishing on the market," said Stevens, senior vice president of NRT Inc. "At the same time, some buyers who have believed hype about a housing bubble are hoping prices will drop, but that’s not happening either."
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The 30-year fixed-rate mortgage should increase gradually to 6.9 percent in the fourth quarter.