Realtors Predict ’06 Drop in U.S. New-Home Prices

New-home prices will fall this year for the first time since 1991 and existing homes will have the smallest gain ever as a glut of properties forces sellers to accept lower offers, the National Assn. of Realtors said Wednesday.

The median price for a new home probably will slip 0.2% to $240,500, the first decline since a drop of 2.4% 15 years ago, according to the Realtor group. The median price for previously owned homes is likely to rise 1.6% to $223,000, the smallest gain on record, the group said in a statement from its Washington office.

The inventory of homes for sale has swelled to record levels as the five-year U.S. housing boom comes to an end. An index of home builders, including industry leaders D.R. Horton Inc. and Pulte Homes Inc., has plummeted 26% this year as investors worried about home-price reversals after gaining 147% in the previous three years.

“The vast majority of homeowners have locked in huge gains that are not going to be erased,” said Michael Darda, chief economist of MKM Partners in Greenwich, Conn.

Home-price gains have averaged 11% in the last two years, according to the Realtor group’s data, boosting the median price for a previously owned home to $219,600 in 2005. The average annual gain over the last 50 years is 5%, according to Freddie Mac, the No. 2 U.S. mortgage buyer.

The inventory of homes on the market rose to a record 3.92 million in August, the Realtor group said in a Sept. 25 report. Builders had 568,000 new homes for sale that month, the second-highest on record after July’s 570,000, the Commerce Department said Sept. 27.

Sales of previously owned homes probably will drop 8.9% this year to 6.45 million, which would be the third-highest year after consecutive records in 2004 and 2005, the Realtor group said in the report. New-home sales probably will plunge 17.3% to 1.06 million, the fourth-highest level, according to the forecast.

Buyers have a “wait and see attitude” because they want to take advantage of price declines, David Berson, chief economist of the trade group, said in the forecast.