18.10.2006 19:33 - category: Real Estate: Real Estate Industry
WASHINGTON (Reuters) -- U.S. home sales for the year will be weaker, and price appreciation will be smaller than previously forecast, a realtors group said on Wednesday.
In its monthly economic outlook, the National Association of Realtors lowered expectations for the two key housing indicators but said strong economic fundamentals signal that the market will stabilize.
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"Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year," said David Lereah, NAR's chief economist.
For this year, though, the group expects the housing market to end weaker than it had previously predicted.
The median home price - the price at which half of the homes sell for more and half for less - is likely to rise 1.6 percent to $223,000 for all of 2006, the group said Wednesday.
In September, the group saw a rosier picture for home prices when it said the median price for existing homes should grow 2.8 percent to $225,900.
During the white-hot housing market of 2005, prices appreciated 12.4 percent.
On Wednesday, the group also said existing home sales are expected to drop 8.9 percent to 6.45 million for the year.
Last month, the group predicted that existing home sales would drop 7.6 percent to 6.54 million. In August, the group said it predicted existing home sales would fall only 6.5 percent.
Even after revising its home sales estimate for the year, NAR noted 2006 is expected to be the third-strongest year for sales after consecutive records in 2004 and 2005.
The 30-year fixed-rate mortgage will probably average 6.5 percent in the fourth quarter but will trend up modestly in 2007, the group said.
Homebuilders such as KB Home (Charts) and D.R. Horton (Charts) are sensitive to drastic changes in the outlook of the real estate market.
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