USA Today
WASHINGTON (Reuters) — Home sales will fall in 2006 as house prices rise at rates far below those notched last year, but the housing market should remain healthy by historic standards, a trade group said Tuesday.
The National Association of Realtors’ chief economist said sales of existing homes should drop 4.7% to 6.74 million units this year, from a record 7.07 million in 2005
Sales of new homes should fall 8.5% to 1.17 million units, from a record of 1.28 million, David Lereah said in his monthly outlook. He pegged 2006 housing starts at 1.87 million units, down 9.3% from 2.06 million.
“Sometimes people lose sight of the fact that real estate is cyclical,” he said. “Even so, sales will continue at a historically high pace with modestly higher interest rates as the year progresses, and 2006 is forecast to be the third strongest year on record.”
Lereah said the national median existing home price for all housing types is expected to rise 5% to $219,200 — a rate of increase far below the double-digit annual gains notched during a five-year market rally.
Some home builders are already feeling the slowdown.
Toll Brothers (TOL) on Tuesday lowered its guidance for home deliveries this year as it noted softening demand in a number of markets.
The home builder said its backlog as of Jan. 31 rose 22% to about $5.95 billion.
But signed contracts were down about 21% from last year to $1.14 billion.
“Selling homes this first quarter was certainly more difficult than one year ago,” said Robert Toll, chairman and chief executive, in a statement. “We experienced softening demand, to varying degrees, in a number of markets and continue to be constrained by long delivery times at many of our communities.”
“Although demand is not as strong as it was one year ago, most of our markets remain fundamentally healthy, based on job and income growth data,” Toll said.
Deliveries were below the company’s projection primarily because of delays in obtaining certificates of occupancy, construction inspections and utility hook-ups.
As a result, Toll Brothers reduced its fiscal-year deliveries guidance to between 9,200 and 9,900 homes, compared with prior guidance to 9,500 to 10,200 deliveries and 8,769 deliveries in fiscal 2005.
It also said first-quarter revenue rose 35% to about $1.33 billion
