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ECONOMICS -
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Realtors say home prices are "close to a peak," with condos to fall

Posted in the database on Friday, August 12th, 2005 @ 19:31:01 MST (1943 views)
by Kathleen M. Howley    Sun-Sentinel.com  

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UN-REAL ESTATE: Some experts warn housing bubble may have sprung leak

U.S. home sales are "close to a peak" and prices will rise next year at about half the rate of 2005, the National Association of Realtors said.

The nationwide median price of an existing home will increase 5.2 percent to $215,200 next year, the smallest gain since 2000, when prices rose 4.1 percent, according to a forecast Tuesday by the Washington-based trade group. Sales of previously owned homes will fall 3.6 percent and sales of new homes will drop 4.5 percent.

"The housing market is probably close to a peak right now in terms of sales activity, but there is tremendous momentum," said David Lereah, chief economist for the association, in a statement. "Sales are expected to coast at historically high levels into next year, but they will trend slightly downward."

Lereah's statement Tuesday comes six months after the release of his book, Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade and How to Profit From Them.

In South Florida, housing analyst Jack McCabe said the housing market has reached its pinnacle and as interest rates increase over the next year, prices will begin to decline. The hardest-hit market will be new condominiums, McCabe said.

"By the end of the first quarter of next year, South Florida is going to be flooded with condo inventory and we will start seeing the correction and downward spiraling of prices," McCabe said. "With single-family homes, because of the demand for them and the very limited supply, I expect prices will level off, but they will maintain value."

This year, a national shortage of homes for sale and mortgage rates that tumbled in June fueled the biggest price increases in a quarter of a century, the association said. The median home price will gain 11 percent to $204,600 in 2005, the Realtors predicted. That would be the biggest jump since 1980, when prices increased 12 percent.

The median price is the point at which half the homes sell for more and half sell for less.

The group forecast that sales of existing homes will increase 2.9 percent to a record 6.98 million in 2005. Sales of new houses will jump 4.8 percent to a record 1.26 million.

The average U.S. rate for a 30-year fixed mortgage will be 5.9 percent this year and 6.5 percent in 2006, according to the group's forecast. Measured weekly, the rate unexpectedly fell to a 15-month low of 5.53 percent at the beginning of July, gaining since then to reach 5.82 percent last week, according to Freddie Mac, the No. 2 U.S. mortgage company.

New construction of single-family homes and multi-unit buildings should grow 3.2 percent to 2.02 million this year, the highest since 1978, and fall 7.8 percent to 1.86 million in 2006, the association said. Single-family starts probably will grow 3.6 percent to a record 1.67 million this year and fall 12 percent in 2006 to 1.48 million.



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