The past five years the nation's real estate market has been red hot for sellers and their agents.  But just as when we overeat and don't exercise during the holidays when they are over we realize we need to regain balance in our lives.  So too, we need balance in the housing market.  Well, have no fear 2006 is here and the key word for the housing market in 2006 is balance.  

According to David Lareah, the chief economist of the NATIONAL ASSOCIATION OF REALTORS®, "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.

While REALTORS® have enjoyed the overheated market we also know the housing industry cannot sustain double-digit price increases year after year.  A cooling trend certainly will help to settle down prices and increase affordabililty.  In turn, this will benefit first-time home buyers as well as our economy by creating more homeowners. 

Home sales for 2005 are projected to finish the year at an amazing 7.1 million units.  Sales of existing-home are forecast for 2006 to slow by 4.4 percent to 6.79 million this year making it the second highest on record.  A modest slowdown from the past five years which saw consecutive annual record sales.  Similarly, new homes sales which are estimated to be a record 1.29 million in 2005 are projected to dip only slightly to 1.21 million.

Economics 101 - Supply and Demand.  Great news for home buyers.  Buyers are no longer going to be fighting over a limited supply of homes in 2006.   Bidding wars we saw in recent years are going to only fond memories for home sellers and their REALTORS®.  That means home prices generally will appreciate slower and closer to the long-term norms which is the overall rate of inflation plus one or two percentage points. Again, good new to buyers because lower price appreciation provides greater opportunities for first-time buyers yet maintains the investment advantages of home ownership for sellers.

More good news for buyers and sellers is that anticipated loan rates will increase nominally and are not projected to go above 6.7% during 2006.  Stabilizing the supply of homes, capital and demand by home buyers will return balance to the housing market and maintain affordability.  All good things for REALTORS® and all Americans. 

Prediction for 2006:  I am going out on a limb here but I believe 2006 will be another great year (near record sales) for homeownership!