US Home Sales to Fall in 2006

U.S. home sales will fall in 2006 as house prices rise at rates far below those notched last year, but the housing market should remain healthy by historic standards.

The National Association of Realtors' chief economist said sales of existing U.S. homes should drop 4.7 percent to 6.74 million units this year, down from a record 7.07 million in 2005.

Sales of new homes should fall 8.5 percent to 1.17 million units from a record of 1.28 million in 2005, David Lereah said in his monthly outlook. He pegged 2006 housing starts at 1.87 million units, down 9.3 percent from the 2.06 million posted in 2005.

The national median existing-home price for all housing types is expected to rise 5 percent to $219,200 -- a rate of increase far below the double-digit annual gains notched during a five-year market rally.

Sometimes people lose sight of the fact that real estate is cyclical. Even so, sales will continue at a historically high pace with modestly higher interest rates as the year progresses, and 2006 is forecast to be the third strongest year on record.