Realty Times Outlook - Time to Panic? Lereah Say No

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Realty Times Outlook - Time to Panic? Lereah Say No
by Blanche Evans

Is it time to panic? Housing sales are down, housing prices are lower in key markets, and some experts are saying the sky is falling. Housing has propped up the nation's economy for nearly five years, following the collapse of the tech sector in stocks and the brutal events of 9/11. In fact, housing has broken sales records for five years consecutively, suggesting to many that housing's winning streak is about to come to an end. Two recent reports have housing investors running for the exits -- the National Association's monthly report that housing sales slumped 3 percent in December -- despite setting a record for over 7 million housing units sold for 2005 total. But then the California Association of Realtors announced that home sales nose-dived more than 17 percent in the same month. But hold the phone. Your house is not going to implode, explode or disappear like stock options in a bad IPO. Let's look at the big picture -- there's a lot more good news than bad for homebuyers. The Census Bureau just reported that new home sales increased in December. Meanwhile, interest rates have softened to pre-December levels. Also, housing prices continue to shoot upward. In 2005, the median national price was $208,700, up nearly 13 percent (12.7 percent) over home prices in 2004. ($185,200.) Prices also continued to climb in California, where December prices were still up 16 percent over last year. The NAR's chief economist David Lereah says there's no reason to panic. Not only was a market adjustment expected -- it's healthy. In an exclusive interview with Realty Times, Lereah said this: "There is a transition taking place in most of the nation's hot housing markets: transitioning from a sellers' market to a buyers' market. In that transition, home sales drop and after some time, price appreciation follows." But he says -- the sector still exhibits solid fundamentals: low rates, lean supply and healthy demand. What is transpiring to date is the exit of investors from hot markets. That is exacerbating the fall in home sales. But a falling market share of investors is good -- it's almost a cleansing -- for the housing sector. It takes the speculative and risky element out of the equation. So where does that leave housing in 2006? "It will be a down year," says Lereah, "but it will leave us a great deal healthier to begin 2007." Realty Times has been saying the same thing for weeks -- there will be some pullback in the market, but then you'll see buyers swooping down on good deals in housing again. Why? There's still no better place to put your money.