Home Sales Keep Rocking

Talk of a real estate bubble might continue to percolate through the national media, but a recent report by five housing industry economists shows these theories to be mostly hot air. "We have never had a national price bubble", says David Lereah, NAR's chief economist and senior vice president of research.

Citing falling unemployment, low mortgage rates, and an accelerating economy, the five authors of America's Home Forecast: The nNext Decade for Housing and Mortgage Finance conclude: "The likelihood of a decline in home prices at the national level is quite remote." They attribute any local bubble characteristics to limited supply.

The outlook for home sales remains strong through the next decade with the homeownership rate expected to rise to over 70 percent with 10 million new homeowners by 2013. Minority households are projected to account for about half of this gain. Sales of new and existing homes and condos are forecast to average 8.27 million to 8.85 million units a year.

Demographic trends - immigration, boomers still entering peak homebuying years, and echo boomers entering the marketplace - remain favorable. At the same time, shortages of developable land, concerns about sprawl, and environmental issues will constrain supply, ensuring appreciation. Prices are projected to increase on average 5 percent annually. Most important, price appreciation should track closely with income growth, a pace described as sustainable over the long run.