The Future of Real Estate 2006

RISMEDIA, Jan. 26 – RE/MAX chairman, Dave Liniger predicts 2006 will be the second best year the real estate industry has ever experienced. After reviewing 2005 year-end data, released yesterday, Liniger observed that the past year was clearly the best he’d ever seen, but 2006 will likely continue the winning ways.

Liniger stated that 2005 was the culmination of a historical trend, resulting from several economic factors, “2005 was the fifth year in a row that records were set. What’s happened is the economy has been fueled by the real estate market, which has shown continued strength.”

Year-end National Association of Realtors® data revealed that in 2005 existing homes sales were 7,072,000, an increase of 4.2 percent over 2004. The figures show that 2005 also saw a record increase in the median price of an existing home. The national median price rose from $185,200 in 2004 to $208,700 in 2005. Rather than predicting an ominous decline in the housing market, Liniger feels that 2006 will only see a moderate correction.

Liniger commented on the state of real estate and the housing market after NAR released its Existing-Home-Sales data for December, and a preliminary year-end summary. The December data showed a decrease of 5.7 percent to a seasonally adjusted annual rate of 6.60 million units in December from an upwardly revised pace of 7.00 million in November. Sales were 3.1 percent lower than the 6.81 million-unit level in December 2004. But the RE/MAX chairman feels the real estate market is in for another banner year. “I don’t think the last two months are anything worse than a normal cycle of the real estate business. November and December declines were a normal reaction to fluctuating interest rates. This year we would anticipate that resales will probably drop 4 to 5 percent from the record pace that they were last year. “I think we are going to see an outstanding year for the real estate business.”

Prices for existing home sales may retreat more in some parts of the country, but for most regions, Liniger does not expect the dramatic collapse in prices predicted by some observers. “You do certainly have to be a little concerned with properties that have shown double digit appreciation on both coasts.” Liniger feels 2006 will be best described as the-year-of-the-correction, “We’re getting back to a much more normal real estate market. You’re going to see price appreciation, depending upon the region you’re in, somewhere between three and six percent.”

One of the reasons that the housing market has been on a record setting pace is historically low interest rates. Liniger believes that rates may climb somewhat in the upcoming year, but not enough to derail the real estate market. “I think you’re looking at very reasonable rates in the neighborhood of six-point-five percent before the year is over.”

As far as real estate trends in 2006, Liniger says to watch the baby-boomers. They’ll continue to keep the market hot. “They see real estate being a very, solid investment, unlike recent experiences in the stock market. So, I think you’re going to see second home sales continue to be very, very strong.”

Housing Market Will Continue To Lead The Economy In 2006 . “Most sellers did extremely well in 2005,” Liniger added, but part of the normalization process will mean the market may shift a little more in favor of the buyer. “There won’t be as many people standing in line to buy, and prices won’t go up dramatically. In 2006 we feel it will be a little easier for the buyers in the marketplace.”

Liniger cautions that each individual market has its own specific economics, and it’s always tricky to make the perfect deal. “You can’t time the real estate market, just like you can’t time the stock market but overall, unemployment and interest rates are still very low which makes conditions ripe for an excellent real estate market. I feel confident that real estate will continue to lead the economy in 2006.”

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