Wednesday, January 11, 2006

NAR: Housing Market to "Normalize" in 2006

The National Association of Realtors ( NAR) is saying the market will 'normalize' in 2006. The Bubble Meter continues to bash NAR for their misleading information. The press release states:

The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors.

David Lereah, NAR's chief economist, said current trends in the housing sector are healthy. "We don't need to break a record every year for the housing market to be good, in fact, cooling sales are necessary for the long-term health of this vital sector," Lereah said. "A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong."


"A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year," Lereah said. The 30-year fixed-rate mortgage is likely to trend up gradually to 6.7 percent during the second half of the year. "This will preserve generally favorable affordability conditions and keep the housing market at a more sustainable sales pace."

NAR President Thomas M. Stevens from Vienna, Va., said price appreciation should be at more normal levels across most of the country. "Buyers are no longer competing for a tight supply," said Stevens, senior vice president of NRT Inc. "That means home prices generally will rise much closer to long-term norms, which is the overall rate of inflation plus one or two percentage points. Lower price appreciation will keep the door open to first-time buyers while preserving the investment advantages of homeownership for sellers. "

The national median existing-home price for all housing types, projected to jump 12.9 percent to $209,100 for 2005, is forecast to rise 5.1 percent to $219,700 this year. The median new-home price, which should be up 4.6 percent to $231,300 for 2005, is expected to increase 6.0 percent this year to $245,200.

Inflation as measured by the Consumer Price Index is projected to rise 3.4 percent for 2005 and 3.0 percent in 2006. Inflation-adjusted disposable personal income is forecast to increase 1.3 percent for 2005 and 4.6 percent this year.

Growth in the U.S. gross domestic product is likely to be 3.6 percent for 2005, with GDP seen at 4.0 percent this year. The unemployment rate is expected to drop to 4.8 percent by the end of the year.
Interesting. The GDP will not grow 4.0 percent this year. GDP growth will be much lower due to changing economic conditions as the unsustainability of this debt ridden twighlight economy finally catches up.

Furthermore, the soft landing that the NAR is touting will NOT occur in the bubble markets. There will be significant declines in real dollar prices over the next few years in the bubble markets as the bubble pops.


  1. With anemic job growth in the current 'expansion' and at least 30% related to real estate- is it justifiable to have 50-100% or more price rises in California, the north eastern megalopolis appropriate? In the roaring 90s with over 20 million jobs created there was not this kind of price appreciation. Mr Lereah talks out of his ***HOLE. Now despite subpar economic job growth, soaring energy prices, massive debt, we now will have a 'normal market'.

  2. Normalize you say! Like most areas of the country the last few years, houses in by development would be snapped up in less than a week.!! Fast foward to today..........12 houses for sale out of 150 houses in the development.......5 have been empty for 2 months! If this is Normalized, housing is truly heading for hell!

  3. Lereah is the biggest cheerleader and is the poster boy for RE. He is an Industry Shill who deserves to be held accountable for ruining many people's lives.