New US home sales 'to drop 12.8%

Overall sales levels in the US housing market will change little over the the rest of 2006, forecasts the National Association of Realtors (NAR).

Although the NAR is predicting that sales will continue at a fairly steady pace for the rest of the year, falling sales earlier in the year mean that annual totals will be lower overall.

Existing home sales are forecast to fall 6.5% to 6.61 million for this year as a whole, but this is still the third highest figure for the US market on record after 2005 and 2004. New-home sales are projected to drop 12.8% in 2006 to 1.12 million, also the third best on record.

David Lereah, NAR's chief economist said that new home sales and new houses being built have been fluctuating, so the overall market is stabilizing.

“On one hand, is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Mr Lereah said.

“This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”

The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9% in the fourth quarter, the NAR have said.

NAR President Thomas M. Stevens said current market conditions are favorable for buyers.

“The rise in housing supply is the biggest change in the market over the last year,” said Mr Stevens. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers.”

The national median existing home price for all housing types is forecast to grow 4.3% this year to $229,000, while the median new home price is expected to rise only 0.5% to $242,100 as builders start to offer incentives to clear unsold inventory.