Realtors Predict Falling Home Prices

According to the National Association of Realtors, home prices will probably fall temporarily as the housing market corrects itself.

Prices are expected to bounce higher in a few months "as the market works through a build in housing inventory," said David Lereah, chief economist for the NAR.

Median home prices are expected to increase 2.8% this year, with 2007 seeing an increase of 2.2%. Median new home prices are expect to rise only 0.2% in 2006, but are said to increase by 2.4% in 2007.

After inflation adjustments, the realtors project that median home prices will be lower at the end of 2007 than they are now.

Existing home prices have been rising at an average of 9.6% a year for the past four years, ahead of the inflation rate. New home prices were up 13.3% in 2004 and 9% in 2005.

"This year sales are slowing, home are plentiful and sellers are negotiating," Lereah explained. "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."

The real estate group is forecasting existing home sales to fall 7.6% in 2006 and an additional 1.7% in 2007. New home sales are predicted to fall 16.1% in 2006 and 7.1% in 2007. Housing starts are expected to be down by 9.6% this year.