U.S. Home Prices Seen Rising at Slower Pace

Home prices probably will gain 4.3% this year, a third the pace of 2005, as higher mortgage rates increase the cost of buying, the National Assn. of Realtors said Tuesday.

The median price for an existing home nationally will increase to $229,000 in 2006 from $219,600 last year, the industry’s largest trade group said. That would be below the 5% average annual growth of the last 50 years, according to data from Freddie Mac, the No. 2 U.S. mortgage buyer. In 2005, U.S. home prices gained 12.4% from a year earlier.

Mortgage rates have risen about half a percentage point since January, making it harder for people to afford houses. The U.S. inventory of unsold homes rose to a 6.8-month supply in June as demand waned, reducing competition for real estate, compared with a 4.4-month supply a year earlier, according to the trade group.

Having more property on the market has “taken pressure off home prices,” Thomas Stevens, president of the real estate group, said in the report. The price gain will slow to 3.8% in 2007, the trade group said.

Sales of existing homes probably will fall 6.5% to 6.61 million this year, from 2005’s record 7.08 million sales, the real estate group said. New-home sales, about 18% of the U.S. real estate market, probably will fall 13% to 1.12 million from the all-time high of 1.28 million in 2005, the trade group said. That would make 2006 the third best on record for both categories.

The average U.S. rate for a 30-year fixed mortgage probably will be 6.6% this year and 6.9% in 2007, the trade group said.