KW Housing Index update

We have not seen much movement since the last Housing Index update was published. The Overall Index and the under-$300,000 Index stayed constant, while the Index for homes between $300,000 – $600,000 fell .01 to .26, and the Index for homes over $600,000 fell .02 to .12. This reflects the general trend of a fast paced market which is gradually slowing to more reasonable growth. KW's economy is one of the hottest around, and this will continue to drive our market.

NAR Sees Markets Stabilizing in 2006:

David Lereah, NAR’s chief economist, said home sales are settling into a slower pace. In recent years we were occasionally challenged to find appropriate superlatives to describe surprisingly high home sales,” he said. “Now the housing market has cooled, but 2006 is still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-taffordablelity. But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable.”

NAR President Thomas M. Stevens from Vienna, Va., said rising interest rates have slowed home sales in many high cost markets, while job growth has boosted sales in some moderately priced areas. “Broadly speaking, rising inventories have taken the pressure off of unsustainable home price growth,” said Stevens, senior vice president of NRT Inc. “For most of the nation, this means future home price gains will be much closer to the normal returns we expect from housing.”

The 30-year fixed-rate mortgage should average 6.9 percent during the second half of the year, and the unemployment rate is expected to average 4.8 percent in 2006.

“Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms,” Lereah said. “The double-digit home price gains we saw in 2005 underscore what a superlative year it was.”

(hat tip: The Real Estate Blog)

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