Realtor Group Cuts Sales Forecast
U.S. home sales will be considerably weaker this year than earlier forecast and prices will probably temporarily fall below year-ago levels as buyers stay on the sidelines, a Realtor group said Thursday.
The National Assn. of Realtors said it changed its forecast because the psychology of the market had shifted, with sellers now willing to negotiate on price and some potential buyers waiting for a more opportune time to make a purchase.
“Under these conditions, we’ll probably see prices dip temporarily below year-ago levels as the market works through a buildup in housing inventory,” the group’s chief economist, David Lereah, said in a statement.
“This is a normal pattern during a market correction, but home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms,” he added.
The Realtor group in recent months had acknowledged the possibility that home prices could drop below year-earlier levels, but the latest projection marked the first time its regular monthly forecasts had incorporated likely declines.
If median prices for existing homes were to fall below the year-earlier level in any given month, it would mark the first year-on-year decline since February 1993.
Although the group said such drops were now likely, it said prices should close out the year with gains, though they would be much smaller than in the last two years.
It said the median price for existing homes -- the price at which half of homes sell for more and half for less -- should grow 2.8% to $225,900 in 2006. By comparison, those prices shot up 12.4% last year and 9.3% in 2004.
The group also said the median price of new homes would probably inch up 0.2% to $241,400, well below the 9% and 13.3% gains posted in the last two years. The sharp slowdown in price appreciation and the possibility of price declines come as sales stumble and threaten to slow the overall pace of U.S. economic growth.
The Realtor group said sales of existing homes were set to drop 7.6% this year to 6.54 million. A month ago, it said it expected existing-home sales to fall only 6.5%.
The association also revised lower its 2006 forecasts for new-home sales and housing starts. It said new-home sales would probably tumble 16.1% to 1.08 million units, compared with a previous forecast of a 12.8% drop, and builders would break ground on just 1.87 million units this year -- 9.6% less than last year.
Separately, Beazer Homes USA Inc., one of the nation’s largest home builders, on Thursday lowered its earnings forecast for 2006 as net sales in July and August fell and contract cancellations rose.