It was slower but still a great year

By Justin Hunter

Contrary to popular belief, 2006 was not one of the worst years in the real estate industry and in fact ended up being one of the best.
Having to compete with the record highs in price and sales appreciation that occurred during the great boom from 2000 to 2005 hindered the image of the 2006 market. But, even though the 2006 housing market experienced declines in almost every facet from 2005, it was still one of the best years on record, which is something to note considering all the doomsayer reports.
The contradicting forecasts for 2007 remain yet to be proven true or false but where the 2006 market left off, real estate and housing appears to have a bright future. The article, “2006 -- It Was A Very Good Year” written December 26, 2006 by Peter G. Miller and published in Realty Times provides the more than satisfying statistics produced by the real estate market in 2006.
It is amazing to hear the final synopsis of the 2006 real estate industry read as a very profitable year when many economists and so-called experts were making real estate bust comparisons to the Great Depression as the “doomsday” bell was being polished in preparation.
“According to the National Association of Realtors, annualized home sales as of October -- the last figures available at this writing -- were expected to reach 6.24 million, a very good year by most standards but down 11.5 percent from 2005. As to prices, by October 2006 they were down 3.5 percent nationwide when compared with a year earlier -- but many metro areas actually showed strong price gains: As of the third-quarter NAR reported that of 148 metro areas, 21 had double-digit price increases for the year, 102 had price gains, 45 had declines and one was unchanged.”
But these year-over-year declines were only natural considering how inflated the figures became in 2005. If taken out of context, 2006 would have been considered as an excellent year in the industry.
There is a lot real estate entrepreneurs can be thankful for this holiday season, as 2006 could have proven to have a much more dismal outcome.
“Sales and prices would have been in far worse shape during 2006 had interest levels risen. Figures from Freddie Mac show that interest rates for 30-year fixed-rate loans topped out in late July at 6.8 percent while in mid-December the same loan could be had at 6.12 percent, a significant decline. Relative to rates seen during the past 45 years, 6.12 percent is very much toward the bottom.”
While June marked a 6.8 percent rate, just about every newspaper and media conglomerate were preparing consumers for mortgage rates to top 7.0 percent, something that could have crippled the industry towards the end of the year.
“Why interest rates have stayed so low is an outright mystery. The federal government has added at least $1.5 trillion to the deficit in the past five years. Trade with other nations is upside down -- we spent $432 billion more than we took in just during the first six months of 2006.”
Although the latter half of 2006 produced enthusiasm for investors and sellers as the market began to slowly grow gain in terms of sales and price, a market revival in 2007 may not come to fruition as mortgage rates could very well see an increase once again. But if you haven’t learned by now, national figures serve only as a barometer of your local market unless you are a national investor. .
“Rather than worry about national trends it's best to look at local values. It's useful for property owners and would-be property owners to speak with nearby brokers once a year. Such ‘tell me about the market’ sessions can include a careful look at local sales in the past year, community trends and new factors which may impact area home values such as a nearby school opening or road construction.”
So, 2006 was not as bad as many thought and we can now eagerly anticipate the New Year in 2007.