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The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors® (NAR).

David Lereah, NAR’s chief economist, said current trends in the housing sector are healthy. “We don’t need to break a record every year for the housing market to be good—in fact, cooling sales are necessary for the long-term health of this vital sector,” Lereah said. “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”

After setting a fifth consecutive annual record, projected to 7.10 million units for 2005, (see note 1 below) existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, which would be the second highest on record. New-home sales, which should be a record 1.29 million for 2005, are expected to decline 6.0 percent to 1.21 million in 2006—that also would be the second best year in history. Total housing starts for 2005 are seen at 2.07 million units—the highest since setting a record 1972—with a 6.6 percent slowing to 1.94 million this year.

“A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year,” Lereah said. The 30-year fixed-rate mortgage is likely to trend up gradually to 6.7 percent during the second half of the year. “This will preserve generally favorable affordability conditions and keep the housing market at a more sustainable sales pace.”

NAR President Thomas M. Stevens from Vienna, Va., said price appreciation should be at more normal levels across most of the country. “Buyers are no longer competing for a tight supply,” said Stevens, senior vice president of NRT Inc. “That means home prices generally will rise much closer to long-term norms, which is the overall rate of inflation plus one or two percentage points. Lower price appreciation will keep the door open to first-time buyers while preserving the investment advantages of homeownership for sellers.”

The national median existing-home price for all housing types, projected to jump 12.9 percent to $209,100 for 2005, is forecast to rise 5.1 percent to $219,700 this year. The median new-home price, which should be up 4.6 percent to $231,300 for 2005, is expected to increase 6.0 percent this year to $245,200.

Inflation as measured by the Consumer Price Index is projected to rise 3.4 percent for 2005 and 3.0 percent in 2006. Inflation- adjusted disposable personal income is forecast to increase 1.3 percent for 2005 and 4.6 percent this year.

Growth in the U.S. gross domestic product is likely to be 3.6 percent for 2005, with GDP seen at 4.0 percent this year. The unemployment rate is expected to drop to 4.8 percent by the end of the year.

The current buyers market has created two major problems for real estate agents and how they get their customers:
a majority of agents have built their business around listings, while only a smaller percentage have aggressively marketed to buyers, and the highest majority of buyers are online and yet, only 11 percent of agent advertising dollars has been put to online use. The majority is still spent on expensive print ads.

Florida realtor Dennis Handa remarked, “Real estate is one of the most searched terms in Google and according to the National Association of Realtors, over 60 percent of buyers go online, and of these, 78 percent find their real estate agents on the internet. The statistics indicate that agents need to shift priorities and actively go after online buyers.”

An online solution has not been easy for two reasons:

1. Agents that do have sites don’t work at getting links, at adding meta tags or at improving their search engine placement. For the most part, they create a site and leave it alone.




2. As a result, most agent sites are not found in the first three pages of the major search engines (90 percent of sites that are clicked on exist in these first three pages).

Florida realtor Dennis Handa commented, “To address these problems, we’ve launched a 460-page Florida relocation site covering 18 categories of in-depth information for 46 areas and cities in Florida.”

Site topics range from employment, cost of living, health, education, arts, recreation, transportation, starting a business, investment opportunities, 1031 exchanges, commercial, residential and property management agents.

Handa added, “Buyers definitely want information and until now, finding it meant endlessly searching the internet. By putting everything in one place, we are helping both the buyers and the agents that are on our site. It’s a perfect win-win situation.” In just over 45 days, the site has registered over 100,000 hits and over 100 new advertisers.