December 13, 2005

What About This News Resembles a Bubble Bursting?

Filed under: Economy — Tom @ 11:19 am

Answer: Not a thing. It’s really a return to normal (link requires free registration; bolds are mine):

Home-sales pullback seen in 2006
Realtors say market moving to ‘more normal’ times

BOSTON (MarketWatch) — The National Association of Realtors predicted Monday the U.S. housing market will fall off a bit in 2006, but that sales activity is still expected to post the second-best year in history.

“The slowdown amounts to a tapping of the brakes on a hot market,” said NAR Chief Economist David Lereah, who added home sales will plateau at a level higher than previous peaks in the housing cycle.

“This transition to a more normal and balanced market is a good thing,” Lereah said in a statement.

The Realtors group said it expects existing-home sales to rise 4.7% to 7.1 million in 2005, but fall 3.7% next year. Meanwhile, new-home sales are seen rising 7% this year to 1.29 million units, and dropping 4.8% in 2006.

Total housing starts are predicted to increase 5.8% in 2005 to their highest levels since 1972, then fall 4.8% in 2006, according to the NAR.

However, the association thinks home prices will continue to rise next year.

The median selling price for previously-owned homes is estimated to rise 12.7% in 2005, and jump a further 6.1% next year. New-home prices should grow 5.5% this year, and 7.3% in 2006 “as higher construction costs impact the market,” the NAR said.

Bubbles aren’t bursting if prices are still expected to rise (and by a percentage greater than expected inflation to boot).


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