Historically Strong Home Sales Expected in 2006

(December 12, 2005) -- The housing market for 2005 is headed for a fifth consecutive annual record, and sales activity in 2006 is expected to be the second best year in history, according to the NATIONAL ASSOCIATION OF REALTORS®.David Lereah, NAR’s chief economist, said that market conditions are still favorable for housing.

“The slowdown amounts to a tapping of the brakes on a hot market,” said Lereah. “Home sales are coming down from the mountain peak, but they will level-out at a high plateau – a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing.”

The 30-year fixed-rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006.Existing-home sales, expected to rise 4.7 percent to 7.10 million this year, are likely to decline 3.7 percent in 2006 to 6.84 million. New-home sales, projected to increase 7.0 percent to 1.29 million this year, are forecast to drop 4.8 percent to 1.23 million in 2006 – also the second best on record. Total housing starts for 2005 should grow 5.8 percent to 2.06 million units, the highest since 1972, and then decline 4.8 percent to 1.92 million next year.

NAR President Thomas M. Stevens from Vienna, Va., said that housing has always been the soundest investment for most families.

“As the old saying goes, homeownership beats the heck out of a drawer full of rent receipts,” said Stevens, senior vice president of NRT Inc.

According to the Federal Reserve Survey of Consumer Finances, the median net wealth of a homeowner household is 36 times higher than a renter household. Stevens said that the national median home price has never declined since good recordkeeping began in 1968.

“Although there can always be a temporary decline in a given area if jobs are weak and there is an oversupply of homes on the market, people who stay in their homes for a normal period of homeownership generally see healthy returns over time. There are no guarantees, but there are very good odds.”

The national median existing-home price for all housing types, which is experiencing a surge estimated at 12.7 percent to $208,800 for 2005, is expected to rise another 6.1 percent in 2006 to $221,400. The median new-home price is likely to rise 5.5 percent to $233,100 in 2005, and then grow by 7.3 percent next year to $250,100 as higher construction costs impact the market.The U.S. gross domestic product should grow 3.7 percent for 2005 and 4.1 percent next year. The unemployment rate is expected to decline to 4.9 percent by second quarter of 2006, and then stabilize.The Consumer Price Index is projected to rise 3.4 percent for 2005, and 2.9 percent next year. Inflation-adjusted disposable personal income is forecast to increase 1.4 percent in 2005 and 4.5 percent in 2006.NAR

In the Buyer's Corner...

Five Secrets to a Successful Purchase
By Bob Bruss

If your resolutions for 2006 include buying a house or condominium—whether it will be your first home or a move-up residence—today is a great time to plan for your purchase.

Home mortgage interest rates remain remarkably low and affordable. During this slowest time of the year for home sales in most communities, between Thanksgiving and New Year's Day, this is a great time to start your quest for the near-perfect place to live. Here are five secrets to make your purchase easy and profitable:

1. Before looking at homes, get a written mortgage pre-approval by an actual lender. Contrary to popular myth, the first step to buying a home is not to start inspecting residences that interest you. Instead, your first step to a successful home purchase should be to get pre-approved in writing by an actual mortgage lender. Then you will know the maximum mortgage you can obtain.

But don't be misled. Some mortgage brokers advertise "mortgage pre-qualification." That means absolutely nothing.

Worthless pre-qualification means only "based on your information, which we have not verified, it appears you can obtain a home mortgage."

Instead, smart home buyers get a written mortgage pre-approval letter or certificate from an actual mortgage lender, such as a bank or mortgage banker. Mortgage brokers can obtain these pre-approvals after taking your loan application and checking the details, such as verifying your employment and credit report.

With a lender's written mortgage pre-approval letter or certificate, you will be in a strong position to shop for a home and make a purchase offer, confident your mortgage lender has already approved your loan, contingent on a satisfactory appraisal of the home you decide to buy.

2. Take your time buying a home. A special advantage of buying a home during this slow time of the year for home sales, which extends even until Super Bowl Sunday in many towns, is there are usually few other home-buyer competitors.

Buying your home is a major decision so take your time. Don't be rushed.

A good place to start, as do 71 percent of today's home buyers according to a recent survey by the National Association of Realtors, is on the Internet. The most frequently visited Web site for home buyers is http://g.msn.com/2HA/1?http://www.realtor.com. Savvy real estate agents also have their own Web sites that provide access to local MLS (Multiple Listing Service) listings

Home buyers who are in a hurry often make costly mistakes. The prime example is an out-of-town buyer whose job transfer requires a quick home purchase. These buyers frequently make hasty bad decisions.

Examples of expensive home purchase errors include buying a home in a poor-quality school district, failure to check the local crime rates, locating in a neighborhood with heavy traffic noise or other drawback such as an adjacent railroad, flood area location, inadequate nearby shopping, and long commute time to employment areas.

Equally important, home purchasers who think they have located the "perfect home" should always make purchase offers contingent on their approval of a professional home inspection report. Buyers should always accompany their inspectors to discuss any defects that the seller didn't reveal in his/her written defect disclose report.

3. Always work with a buyer's agent. Every home buyer needs his/her own buyer's agent to look out for the buyer's best interests. But finding a top-quality buyer's agent isn't easy.

Ask friends and business associates for their recommendations of buyer's agents. But beware of any buyer's agent who asks you to sign a buyer's agency contract over 30 days.

A better alternative is to sign a 30-day buyer's agency contract with an understanding you will extend it if the agent hasn't found you a home to buy within 30 days but is doing a good job. The result is you then won't be tied up with a lazy agent.

4. Inquire why the home seller is selling. Home buyers who don't want to overpay can't ask too many questions. A key question to ask your buyer's agent is "Why is the seller selling?"

Your buyer's agent might not know the answer, but he or she can easily find out by asking the listing agent. The answer is very important to you.

For example, if you learn the seller is retiring to another area, if the home is free and clear with no mortgage, that house or condo might be a perfect candidate for easy bargain-interest rate seller financing to provide retirement income for the seller.

Or, if you learn there is a pending foreclosure, you must be able to get the sale closed fast. But you might be able to get a bargain price to give the defaulting seller some equity cash from the sale

A related question to ask your buyer's agent is "How much did the seller pay for this home and when was it purchased?" If you learn the home was purchased many years ago at a price far less than today's market value, then you know the seller has lots of room to negotiate on the sales price and the terms. But a home purchased within the last year or two probably won't have as much negotiation room.

5. Ask your buyer's agent to prepare a comparative market analysis (CMA) before you make your purchase offer. No matter how anxious you might be to buy a specific home, before making a purchase offer insist your buyer's agent prepare a written CMA to help you arrive at a realistic purchase offer.
The CMA form shows recent sales prices of comparable nearby homes, the asking prices of similar neighborhood homes, and the asking prices of recently expired listings, which were comparable but didn't sell. Based on this information, you can then add or subtract value for the pros and cons of the properties to arrive at a reasonable market value purchase offer price.

You can be sure your buyer's agent will use the CMA to justify your purchase offer to the seller and the listing agent. Of course, you might not want to offer the full market value justified by the CMA, but that's up to you. Negotiation is half the fun of buying a home.

Even if you can't reach agreement on a sales price and terms, always keep the door open to future negotiations. Several times I've had my home purchase offers rejected, only to be later accepted several weeks later after the sellers realized my latest offer was pretty good after all.

Summary: This "slow time" of the year for home sales can be a great time to buy a home if you have a plan and know what you are doing. First, get pre-approval in writing by an actual mortgage lender. Next, be aware time is on your side during this "slow season" when there is little buyer competition in most communities.

Before making a purchase offer, always ask why the seller is selling and what the seller's purchase price was. This valuable information can greatly aid your negotiations

The help of a buyer's agent usually doesn't add to your home purchase cost but the agent's services can be invaluable, especially when it comes to preparing the buyer's CMA and negotiating the sale price and terms.

© 2005 Microsoft