US home sales, housing starts seen down in 2006

U.S. sales of existing and new homes and housing starts should substantially fall in 2006 compared with 2005, with some high-cost markets hit hard by rising interest rates, a realtors trade group said on Tuesday.

The National Association of Realtors in a monthly forecast said it expects 2006 sales of existing homes to fall 6.5 percent to 6.61 million units. NAR also said new home sales will drop 12.8 percent this year to 1.12 million units, while housing starts should decline by 9.1 percent to 1.88 million.

The NAR forecasts were the same as last month's for new homes sales. Last month, it forecast that existing home sales would decline by 6.7 percent and that housing starts would fall by 6.8 percent in 2006 compared with 2005.

For the third quarter of 2006, the group estimates existing home sales should drop 9 percent from the same quarter a year earlier.

Despite the dropoff, the group said the pace of both new and existing home sales should remain strong enough to put 2006 on course to become the third-highest year for sales.

It said 2005 was the record strongest year for housing sales and starts.

A recent spike in the supply of homes "has taken pressure off of home prices and has significantly widened choices for buyers," said NAR president Thomas Stevens in a statement.

Last month NAR said the U.S. June inventory of existing homes for sale reached 6.8 months' worth at the current sales pace, the largest since 6.9 months in July 1997.

Some high-cost markets like California, South Florida and Washington, D.C., have been hit particularly hard by rising interest rates, the group states, but strong employment data points to steady demand for homes.