No Bubble Burst in 2006

No Bubble Burst for Real Estate Sales in 2006

According to analysts from the National Association of Realtors (NAR), the real estate market in 2006 is expected to see continued strong performance, with no signs of a bubble burst. This year is projected to be the second-best year on record for residential property sales. David Lereah, NAR’s chief economist, commented, “Home sales are coming down from their peak, but they are expected to level off at a high plateau—one that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a positive development.”

Although mortgage rates have recently edged downward, they are anticipated to generally trend upward throughout the year, with expectations reaching around 6.6 percent for a 30-year fixed-rate mortgage. Existing home sales, which are estimated to reach approximately 7.1 million units in 2005 (once final figures are available), are projected to decline slightly in 2006—by about 3.7 percent, bringing the total to approximately 6.84 million units. New home sales, which were about 1.29 million units in 2005, are forecasted to drop by 4.8 percent to approximately 1.23 million units this year. Despite this decline, 2006 is expected to be the second-best year on record for new home sales.

Dave Wilson, president of the National Association of Home Builders, remarked, “The housing market remains fundamentally healthy.” He noted that while many builders are experiencing a tapering off of buyer demand due to resistance to high prices and rising interest rates, many companies are offering incentives to sustain their sales and production. Although home builders' confidence dipped from its summer peak in December, it remains solidly in the positive range, according to NAHB.

Thomas Stevens, NAR president, added, “Housing has always been the soundest investment for most families. As the old saying goes, homeownership beats the heck out of a drawer full of rent receipts.”