After watching home values soar during the past few years it looks as if real estate reality is finally about to set in. The home-pricing forecast for 2006 is mild and modest with higher prices projected for the year but not the double-digit increases seen in 2005.
Then again, the forecast for 2005 was also mild and modest and it turned out to be wildly understated.
According to the National Association of Realtors existing home prices were expected to increase 5.3 percent in 2005. Now, however, NAR predicts that 2005 existing home prices will increase 12.7. If the most-recent NAR estimate is true, it would be the largest one-year price increase since 1979.
As to 2006, NAR says existing home prices should grow 6.1 percent.
In the context of what we know about existing home prices, a yearly increase of 6.1 percent hardly seems impressive — NAR records dating back to 1968 show that cash prices have increased an average of 6.4 percent annually. Also, it”s important to say that real estate is a localized commodity — what happens in a particular area may be radically different than what happens nationwide. It”s entirely...
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