Forecasters predict that housing will continue its downturn, but predictions are mixed when it comes to how much in 2006.

The National Association of Realtors say that housing sales should level-out and remain at historically high levels, according to the National Association of Realtors®. Mortgage rates are trending up, but not so fast as to derail the housing market.

David Lereah, NAR's chief economist, expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year. He says, "Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect.”

Growth in the U.S. gross domestic product is forecast at 3.7 percent in 2006, while the unemployment rate should average 4.8 percent.

Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005, causing sales to equal the third highest year on record, set in 2003. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year – both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.

The national median existing-home price for all housing types is likely to increase 6.4 percent this year to $221,700, while the median new-home price is expected to rise 2.3 percent to $242,700.

Inflation as measured by the Consumer Price Index is seen at 3.4 percent in 2006. Inflation-adjusted disposable personal income should grow 3.8 percent this year, says NAR.

But not all economists are as optimistic, perhaps because of the industries they represent.

One economist believes that cooling interest in housing by investors, flippers and speculators will be a factor.

Diane Swonk, chief economist of Mesirow Financial, in her April issue of Themes on the Economy says that in 2005, when four out of 10 homes were purchased by non-occupying homebuyers including vacation, second-home and investment buyers, "Speculation played a much larger role that we would like, with mortgages used for investment purposes rising to a record-breaking 12.1 percent of the market in the fourth quarter. This leaves us worrying about the magnitude of a market correction, now that cancellations for new homes-largely condos-are on the rise, and speculative investment appears to be cooling."

She predicts that the home sales are forecast to slide a little more than 8 percent from 2005 in 2006, with much of the slowdown occurring in the second half of the year.

She notes, "Sales actually surged a bit at the start of the year in response to unseasonably warm winter weather, which increased buyer traffic; however, some of those gains are now being given back."

Swonk surprises with her forecast that housing starts will drop "at a more aggressive 11 percent rate in 2006 from 2005. The give back to early weather-related drops is expected to be greater for starts than it is for sales."

Agreeing with the NAR about a single-digit appreciation in housing, she says, "Median single-family home prices are forecast to rise 7 percent in 2006, a sharp slowdown from the almost unbelievable and unsustainable 12.8 percent pace of 2005, but still respectable ... . Other factors dampening appreciation include: rising energy prices; the Alternative Minimum Tax Rate; and, a push by Realtors to lower sellers' expectations."

With consumer spending in mind, she says, "Home buying is the single largest trigger of other types of consumer spending, ... so it follows that it should slow along with housing, which is forecast to do in both 2006 and 2007."

When will the effects of the slowdown be felt? Most likely in 2007, not 2006.

Published: April 13, 2006

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.