David Lereah's recent comments

David Lereah, NAR's chief economist, spoke about home prices.

"A year ago we had record home sales and tight supply with buyers bidding over the asking price. This year sales are slowing, homes are plentiful and sellers are negotiating. 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."

He added that "this is a normal pattern during a market correction, but home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms. Keep in mind that over time, home prices rise at the rate of inflation plus one-to-two percentage points -- buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned."

Other key facts from Lereah's remarks:

• National median existing-home price for all housing types is expected to grow 2.8% this year to $225,900.
• Median new-home price will rise only 0.2% to $241,400.
• Existing-home sales are forecasted to fall 7.6% to 6.54 million in 2006
• New-home sales will drop 16.1% this year to 1.08 million
• Housing starts are projected to decline 9.6% to 1.87 million in 2006.
• The 30-year fixed-rate mortgage is likely to rise to 6.7% in the fourth quarter.
• The unemployment rate is expected to average 4.8% for 2006
• Annual inflation, as measured by the Consumer Price Index, is forecast at 3.5%.
• Growth in the U.S. gross domestic product should be 3.4% this year.
• Inflation-adjusted disposable personal income is projected to grow 3.5% in 2006.

What do you think?