WASHINGTON -- The National Association of Realtors announced that US home prices will fall temporarily as the housing market correct. 

Prices should bounce higher in a few months as the market works through a build in housing inventory.
Median existing-home sales prices should rise about 2.8% this year and 2.2% next year, the realtors said in their monthly economic outlook. Median new-home prices are expected to rise 0.2% in 2006 and 2.4% in 2007.

Realtors project that after adjusting for inflation, median home prices would be lower at the end of 2007 than they are now, the.

Existing-home prices have risen at an average of 9.6% annually in the past four years, well ahead of the inflation rate. New-home prices rose 13.3% in 2004 and 9% in 2005.
"This year sales are slowing, homes are plentiful and sellers are negotiating," Lereah said. "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."

Other economists expect declines or little gain in home prices next year. Twenty-five of 48 economists surveyed in the Wall Street Journal's monthly survey said they expect little or no growth in the Office of Federal Housing Enterprise Oversight's home price index in 2007, the newspaper reported Thursday in its online edition.

The average gain in home prices predicted by the economists in the survey was 0.4%. The OFHEO index has never shown an annual decline in its 30-year history. The smallest gain ever was 1.3% in 1991. See full story on the latest OFHEO release.

Lereah said home prices typically appreciate at the rate of inflation, plus one or two percentage points. Buyers who plan to stay in their homes should see those gains, but "people who purchased last year with the intent of flipping are likely to get burned," he said.
From 1968 through 2000, median sales prices rose about 6.2% annually, while the consumer price index rose at a 5.1% annual rate.
Consumer prices excluding shelter costs have risen 4.4% in the past year.
The real estate group is forecasting existing home sales to fall 7.6% in 2006 and a further 1.7% next year. New homes sales are expected to fall 16.1% in 2006 and 7.1% in 2007. Housing starts are projected to fall 9.6% this year and 9.8% next.

The forecasts are slightly below the group's projections from a month ago.
Compared with the group's forecasts at the beginning of the year, the expected declines in existing-home sales and housing starts for 2006 are about twice what was expected, and the expected drop in new-home sales for 2006 is about three times as severe. 

Edwina Baniqued