To cheer up his grumpy Realtors, who pay Mr. Lereah's salary, he offered hope.
"We need a price decline, we were overbloated," particularly on the West Coast, David Lereah, chief economist for the National Association of Realtors, told attendees at his organization's annual meeting here on Friday.
"In 2007, it will be a flat year, maybe 1 percent [sales] drop, and that's it," Lereah said. "After 2007, we'll be back to expansion again."
Lereah forecast that 2006 sales will end up about 9 percent lower than in 2005, a record year. He anticipates sales of 6.47 million units, declining to 6.43 million next year. Prices nationwide will be down by about 2 percent, year over year, and will inch up by 1.5 percent in 2007, he said.
New-home sales will decline this year by 16.8 percent, to 1.07 million units, and will sink 8.7 percent further next year, to 975,000, he said.
Lereah said inventory is stabilizing, citing his trade group's data on pending sales--homes that have gone under contract.
"It appears that inventory has peaked," said Lereah, who now estimates a 7.3 month supply of available homes nationwide.
"We were hovering near four to five months' [supply of homes for sale] during the boom, and in some areas, such as Orange County, Calif., we were measuring it in weeks, not months."
But Lereah said the national picture is positive. "I'm optimistic for 74 percent of the country," where local markets are, at worst, flat. The other 26 percent are in for some rough times."
Struggling the most would be California, South Florida, Arizona, Nevada, and metro Washington, D.C., he said, where sellers need to lower their prices.
Mr. Lereah, the discredited chief