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Home » Family Articles » Real Estate Home Prices To Cool In 2006 Soft Landing Projected For Current Record Housing Boom

Real Estate Home Prices to Cool in 2006 - Soft Landing Projected for Current Record Housing Boom

The five-year boom in existing and new housing sales in many U.S. housing markets is expected to cool in 2006 but final results should still be second best in history, according to projections by top industry economists. National average home price appreciation is also expected to slow from an unsustainable rate of 12.7% this year to about 5.0% next year.

Existing home sales, increasing 4.8% this year to a record 7.11 million, are projected to decline 3.5% to 6.86 million in 2006. New home sales will increase 8.0% to 1.3 million this year and are expected to decline 4.6% to 1.97 million next year.

"We are in the process of setting a fifth consecutive annual record for both existing and new home sales," said David Lereah, chief economist for the National Association of Realtors (NAR). "The market will be coming off a five-year boom and will experience a soft landing next year. An uptrend in mortgage interest rates will cause some slowing of the sales pace but we forecast 2006 to be the second highest year on record. Housing will continue to support the overall economy. The market is entering a period of transition in which we will see a somewhat slower but more sustainable pace of home sales. This will create a better balance between home buyers and sellers."

HouseHunt's national "Current Market Conditions" survey, taken in the third quarter of this year, is in concert with the latest industry projections. It found that the current housing market momentum is being fueled by unprecedented buyer demand, strong sales and price appreciation, strong job and population growth and relatively low mortgage rates.

The survey also found that its taking a bit longer for homes to sell and that the inventory of unsold homes appears to be building in all but the most active markets. Another significant indicator of market strength is that 80% of home sellers are getting 95-100% of asking prices.

Lereah noted: "Baby boomers remain in their peak earning years and their children, the echo boomers, are just entering the period of life when people typically buy their first home." His primary concerns about an otherwise rosy market outlook were the emergence of exotic, interest-only mortgage loans and the threat of the home mortgage interest deduction being eliminated or diluted by tax reform legislation in Congress.

Housing Industry News Briefs

The Pending Home Sales Index, a leading indicator of future home sales, eased slightly to a reading of 128.8 in September but is still at its second highest level since its inception. An index of 100 is equal to the average level of contract activity during 2001, according to NAR.

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An estimated three of four buyers today use the Internet to search for homes, and those using the Internet are more likely to work with a real estate professional than those who do not, according to Cathy Whatley, a former NAR president. "The hardest task Internet buyers face is to negotiate a successful purchase agreement with sellers who frequently receive multiple offers often exceeding list price and then bring the transaction to a successful close."

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Rising mortgage interest rates will not affect most homeowners in the U.S., according to the Mortgage Bankers Association. The trade group's research showed that 35% of homeowners own their homes outright; 50% have fixed rate loans, with many refinancing to get lower rates in the past few years; and 15% have adjustable rate loans. Eight percent of the latter homeowner group are high income earners. Therefore, the MBA concludes, only seven percent of all mortgages are rate sensitive!

The MBA research also found that only 12.5% of homeowners spend 50% of household income on housing. Only 33% spend just over 30%.

In the past 12 months, the U.S. population grew by 2.9 million persons. Between now and the year 2015, demand for new homes is on track to total as many as 20 million units annually. By 2030, there will be 80 million more people living in the U.S. As a result, our housing needs will require that an average of two million units per year is built but our record for building is 1.1 million. Currently there are 74.8 million homeowners in the U.S.

Finally, the MBA reported that no state in the U.S. has ever recorded a year-to-year decline in housing prices. Current national median price is $220,000, an increase of 15.8% over last year.

And here is another random article you might be interested in...

Excel Works, But When Is Industry Specific Better?

There are many businesses in the sign & graphics industry currently using Microsoft Excel for quoting and tracking jobs. In fact you could be one of them. Under certain circumstances using Excel to manage these tasks could be an adequate way to handle shop management. But how do you know when it is time to look for pricing, job tracking and a better software solution? What should you look for when taking this next step?

When is Excel Sufficient?

Companies with a small number of people, where only 1 person estimates, producing very few quotes daily, with little to no re-orders, and selling a small number of products with few options, may do fine using Excel as a shop management system. So as long as these companies aren't experiencing rapid growth and/or work flow difficulties, Excel offers them a substantial return on investment. But when one or more of these variables change the need for a better solution increases.

When is Excel Insufficient?

Excel becomes insufficient when shops experience:

• Company growth (internally and externally)
• Pricing inconsistencies
• Duplicate entry
• Inability to quote jobs quickly
• Lack of integration between management, marketing, & estimating tools

These are often shops that are looking for a way to:

• Save time and increase profits
• See where jobs are while in production
• Easily train others to estimate
• Know the cost of a job
• Control costs and stay competitive
• Effectively target market
• Easily export to accounting software

Am I Ready Now?

The key to an effective business management change, like incorporating an integrated software solution, is to identify the right time to make the switch. In an article I read recently called "Estimating Software Yields Higher Profits", the author spoke of a shop owner who quoted all his jobs using an Excel program they developed in house. Due to this company's growth and a strong need for an accurate representation of their operating cost, the company decided to make the switch and acquire a software estimating system. Why, you might ask? The owner said "When we lost our three largest customers by raising prices, it really opened our eyes."

Understanding, Through Research

Trying to understand the benefits of estimating/business management software isn't an easy task. As you can see in the above situation it is not always clear when your business is ready to begin searching for a shop management system. One thing that is clear though, starting this search early will help you avoid the pain of losing customers, profits, and maybe even a few strands of hair.

Choosing an estimating/business management solution requires basic external and internal research. You need to examine what software is available and how that software will fit your needs and benefit your shop. I have come up with a short list of key items to note when you are ready to purchase a shop estimating/management system.

What Should You Look For?

First, think about the many things you would like a system to do. Are you looking for an integrated system to track customers, orders, and estimate data in one package? Are you looking for a program to help increase your marketing and management capabilities? Or are you just looking for a system that acts like an estimating calculator? No matter what you are looking for in a software package talking with software consultants, such as Cyrious Software's, can help you to clarify your needs and give you an understanding of the tools available and what they will do for you.

Second, make sure you look at software that is designed specifically to fit your industry. A generic program like Excel can do some of the things needed to run your business, but an industry specific shop management system like Cyrious Software will be more useful in the long run. Industry specific software is more valuable to your company not only because of the tools it provides, but also because the training and support staff available to address your company's needs and business environment, is already familiar with your industry.

Third, make sure you understand what it'll take to implement the system. Some systems can be setup by you, others will require more time and outside help. This means look at it and get a feel for the software, get trained, and then fine tune it for a smooth transition. Good software companies should have a great implementation team as well as a great technical support staff. These people will help you get the program up and running quickly and smoothly. Also, the software should be designed so it is easy for you to customize every setting imaginable. If you can't customize the software to fit your shop, you shouldn't buy it. Cyrious Software has shop management software that is flexible enough to allow you to customize the system to match your company's specifications no matter how many different product lines you carry.

The most important requirement of any software system is the ease of use. Most shops we talk with have more work than they are able to handle. This means shops can't afford a slow down due to a complicated software system. "A few clicks, and that's it!" You should make sure the benefits and features of the program are saving time. If the software isn't saving you time, it's definitely not saving you money, therefore isn't adding any value to your company.

Cost, is it an issue?

One thing you shouldn't do when searching for a software solution is focus solely on the cost of the system. Be sure to look at the life cycle cost including support and compare that to the cost of not making a change. With estimating/management software, you really do get what you pay for. Remember a good software system is an asset to your company. The more customizable the software, the more valuable the system is to your business. Since you will continually save hours a day, focusing totally on the initial cost would be a mistake. You should base your investment on the total package: software features, performance, technical support offered, time and money saved.

Whether you are a small shop still estimating manually or a larger shop reluctant to upgrade from your "tried and true" system, the capabilities of estimating/business management software, like Cyrious Software, is worth an investigation.