2006 Housing and Economic Forecast

Seems that all of the talk of a real estate bubble may have popped itself. Expectations for 2006 look quite familiar - in fact, much like the results we had in 2005. The California Association of Realtors released their Housing and Economic Forecast and say that the economic factors look reasonably stable and while there may be a 2% decrease in the number of homes sold, prices should hold steady.

CAR suggests that "it takes a major economic disruption or a rapid increase in interest rates to cause a price decrease in the California housing market. The statewide median home price has increased by an average of 9 percent annually since 1970." The number of second/vacation homes has been on the rise for five years straight (and most of the last decade) and it looks to continue that through 2006.

Overall, it was a cautiously optimistic outlook for 2006 with expectations of steady economic conditions, low but rising interest rates and unchanged inventory levels. For the Coast, I'd expect slightly increased inventories and less-than-normal price growth.