NAR Sees Post-Katrina Housing Boost

Rebuilding in the aftermath of Hurricane Katrina will push up single-family housing starts by 130,000 in 2006, but it will not be enough to top this year's construction activity, according to the National Association of Realtors.The NAR is forecasting that 2005 single-family starts will hit 1.69 million -- the highest level in 25 years. However, housing starts should decline 5.3% to 1.60 million in 2006, and new-home sales will fall 2% from a record pace in 2005, the forecast says. NAR economists attribute the slowdown to higher mortgage rates and a large inventory of unsold newly constructed homes. They expect the 30-year mortgage rate to rise from 5.9% in the fourth quarter to 6.7% in the fourth quarter of 2006 thanks to robust economic growth next year. The NAR's updated forecast also indicates that existing-home sales will hit a record 7.02 million by year-end, followed by a 3% decline in 2006. House price appreciation on existing homes is projected to slow from 10.8% in 2005 to 5.2% next year. But there will be upward pressure on new-home prices due to shortages of building materials, and the NAR expects prices to jump 6.2% in 2006, compared with a 3.8% increase this year. "Given the general tight inventory of homes available for sale across the country, rebuilding in the region of the Gulf Coast will place additional pressure on overall home prices," NAR chief economist David Lereah said.