For those in the market to buy or sell a house, there’s good news and bad news about the housing market for next year.
The bad news: Sales of existing homes, expected to rise 4.7 percent to 7.1 million this year, are projected to decline 3.7 percent in 2006, to 6.84 million, according to the National Association of Realtors.
The good news: Despite the drop in sales, 2006 will be the second-best year in history for existing home sales.
“The slowdown amounts to a tapping of the brakes on a hot market,” said David Lereah, NAR’s chief economist, in a written statement. “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.” Lereah added that the transition to a “more normal and balanced market is a good thing.”
Despite the drop in sales, NAR is forecasting a continued upswing in home prices for 2006. The national median existing-home price for all housing types (including single-family homes, condominiums and townhouses), which is experiencing a surge estimated at 12.7 percent to $208,800 for 2005, is expected to rise another 6.1 percent next year, to $221,400. The median new-home price is expected to rise as well, by 7.3 percent, to $250,100 in 2006 as higher construction costs affect the market.
Despite problems from storms, Florida’s median home price rose 28 percent in October (the latest month for which statistics are available) to $241,000 from $188,800 in October 2004. The median price of an existing single-family home in Broward, Miami-Dade and Palm Beach counties in October was $368,900 (up 25 percent from the previous year), $366,300 (up 29 percent) and $416,500 (up 24 percent), respectively.
The South Florida market, which local brokers say has been starting to cool for the past few months, is also expected to remain strong in 2006, although prices and sales numbers are expected to stabilize.
“We’re returning to a state of equilibrium, which is what we’ve been anticipating,” said Ann DeFries, president of the Realtor Association of Greater Fort Lauderdale. “We knew that prices could not continue to climb the way that they were. Buyers have basically said, `That’s enough.’”
Since Wilma blasted her way through South Florida, more inventory has hit the real estate market as people list their homes for sale, DeFries said. The sellers in her area include seniors planning to move into condominiums to avoid the hassle of hurricane preparation as well as people who want to escape hurricanes entirely by moving out of the area.
How will the increased housing inventory affect the market? “It’s all about supply and demand,” DeFries said. “Houses need to be priced properly now. The days of overpricing a house are gone.”
Other real estate agents agree. “We may not get 35 percent growth [in prices] like we’ve been getting the past two years in Palm Beach County, but I would not be surprised if we get 10, 15 or 20 percent growth,” said Allan Spiro, a real estate agent with Keller Williams in Boynton Beach.
Spiro said that he’s been seeing more people list their homes for sale for the past few months, creating more inventory for buyers to choose from. “The pendulum was on the sellers’ side, with few listings and a lot of buyers,” he said. “Today we’re almost on the other end of the spectrum, with a lot of listings on the market and few buyers.”
He said he considers it an “end of the year slump” and expects demand to pick up after the holidays.
South Florida’s housing market is different from the markets in most other parts of the United States, experts say. Immigration from both northern retirees and Latin Americans creates constant demand, and many of the world’s wealthiest people want to have second, third or fourth homes here, fueling the ultra-luxury market. There is little land left in most parts of South Florida for new construction, so sales of existing homes remains stable.
“We’re basically recession-proof here,” DeFries said.
Of course, a severe winter up north will drive more buyers to the South Florida market, experts say. “People forget about hurricanes,” DeFries said. “We are very happy that they had their first snowfall already.”