The national housing market continues to cool, producing a decline in sales and, in some cases, housing prices, according to the latest report from the National Association of Realtors. But as the housing market softens, the commercial real estate sector has continued its recovery, with the leading commercial market indicator rising in 11 of the past 12 quarters. Although the commercial growth rate has slowed a bit, market observers expect the upward momentum to carry well into 2007.
This is hardly the case with the residential market, however, as news for homeowners continues to worsen. Existing-home sales in July fell 4.1% from June's seasonally adjusted annual rate, and declined a whopping 11.2% from levels at this time last year.
While housing prices nationally are up 0.9% over this time last year, most regions are not faring so well. In the Northeast, prices have dropped 2.1% in the last year, with sales dropping 12.5% during that same period. Prices in the West and Midwest have fallen 0.3% and 0.6% in the last year, respectively, with sales in the West dropping 6.4% in the last month alone—the fastest rate of decline in any of the four regions.
Markets in the South continue to weather the national storm; sales fell a mere 1.2% in the last month and prices in the region still boast a 3.2% rise over prices at this time last year.
According to David Lereah, the NAR's chief economist, higher interest rates have dampened sales, although he said softening prices could be good news for a market badly in need of buyers. "Many potential home buyers have been on the sidelines, some 'kicking the tires,' but mostly waiting for sellers to compromise on price and terms," he said in a statement. "Now, sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it will likely take some months for price appreciation to rise."
Back in the commercial markets, Lereah says that those same higher rates have slowed market activity, but he expects the positive momentum in commercial to continue. "We are seeing a deceleration in the rate of growth—apparently in response to higher oil prices and interest rates—so the expansion should continue, but at a slower pace."
