The latest report from the National Association of Realtors reveals that as buyers are returning to the market, home prices are correcting.

David Lereah, NAR's chief economist, sees this action as a leveling of the market, "Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices. Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year."

What does the NAR forecast for the months to come? Existing homes should remain stable, with sales at 6.45 million. New homes are forecast, however, to drop 17.3 percent in sales. This is still the "fourth highest year on record," though.

NAR also reports that "the national median existing-home price is likely to rise 1.6 percent to $223,000 for all of 2006; it's anticipated prices will remain slightly below year-ago levels before gaining positive traction in the first quarter of 2007. The median new-home price is projected to decline 0.2 percent to $240,500 – largely the result of builder price cuts to move unsold inventory."

With rates rising only slightly this week and unemployment still at low, healthy rates, the predictions for a strong 2007 market should hold true.

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