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A Ho Hum Year Ahead – Shaken But Not Stirred

In Berson’s Weekly Commentary Total home sales for 2005: another record year [Fannie Mae]. [1] 2005 was all about breaking records when looking at the annual numbers.

According to the National Association of Realtors, total existing home sales were up by 4.2 percent to 7.07 million units. Condo and co-op sales were up by 9.3 percent, while single-family sales were up by 3.6 percent. The Census Bureau reported that new home sales were up by 6.6 percent to 1.28 million units.

Fannie Mae Projects:
* Total home sales will decline from last year’s record, falling by around 8.0 percent to 7.71 million units — mostly as investor and second home demand decline.
* December marked the third consecutive monthly decline in total existing home sales, so the trend may already be beginning.

Even with the projected decrease in total home sales, 2006 should still be the third-strongest year ever. You have to remember that Fannie Mae is biased towards a robust housing market like NAR is, but Berson makes a good point.

Pessimists will look to the last quarter of 2005 and say that the market is weakening and use the lower numbers that we may see in 2006, in terms of prices and number of sales compared to 2005 as evidence of a declining market. I agree.

Optimists will look at the annual figures of 2005 as a record and say that any comparison to a record year will show a decline and misrepresents the current market. I agree.

I think its a little of both. The record year in 2005 will skew any meaningful comparisons to the current year as excessively negative. However, recent trends, namely the second half of 2005 showed a downshift in the real estate market and that cannot be ignored.

In other words, its been good, it might be good, but not as good as before.