The following news has been over-dramatized by the national news media, but NAR – in its latest housing forecast – has predicted a slight drop in median home prices for resales by the end of 2007. Remember that this is a national forecast and may have only a limited impact on home prices in Tennessee. Probably the greatest effect in our state will be a psychological one, as home buyers and sellers read about the “first nationwide drop in home prices this year since the Great Depression” …which is how the Wall Street Journal opened an article last week. However, Nashville home sellers have kept listing prices high and continue to accept lower offers from buyers.
For a more balanced look at what’s happening nationally, consider NAR Economist David Lereah’s comments from this past week:
“As home sales moderate, overall home prices will be essentially flat this year,” Lereah said. “The good news is that inventories remain well below the levels experienced during the last housing downturn in the early 1990s, and supplies are close to balance in many areas.
“The national median existing-home price will probably slip 0.7% to $220,300 in 2007, following a 1.0% rise last year. The median new-home price is projected to increase 0.4% to $246,200 this year, after gaining 1.8% in 2006. Modest growth is expected next year, with existing-home prices increasing 1.6% and new-home prices rising 2.0%. The Nashville real estate market is expected to gain 4-6% in value across the board in 2007.
“When you look at housing activity in 2007, especially during the first half of this year, the percentage change in median home price is being distorted as the composition of sales shifts geographically from high-cost markets to moderately priced areas, in contrast with the sales distribution a year earlier,” Lereah said. “Within given markets, most areas can expect minor price gains.”
Of course, when you look at what happened to Brentwood real estate prices last year, it blows the national average out of the water. In 2006 Brentwood appreciated 22%! What is happening now is a natural price correction that will allow for normal appreciation in 2006 rather than a drop in value.
A 0.7% drop, as a national average (considering recent hyper-inflation of prices on both coasts), is NOT a cataclysmic event…
[SOURCES: NAR, Wall Street Journal]
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