The housing market will likely level out in 2006, as sales of existing and new homes are expected to cool in the coming quarters, according to the National Association of Realtors.

Existing home sales are expected to fall 6 percent to 6.65 million in 2006, compared with 7.08 million in 2005, the NAR said Tuesday.

Demand for new homes is expected to fall off as well, with sales forecast to fall 10.9 percent, to 1.14 million this year, compared with a record 1.28 million last year.

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But based on those projections for 2006, both the new home and existing home sectors would see their third-best year, following the booming markets of 2005 and 2004, the trade group said.

Prices for new and existing homes are also expected to slow from their previous rate of growth, while still maintaining steady rates of increase over the course of the year.

The median price for existing homes should climb 6.4 percent in 2006 to $221,700, while new home prices are forecast to increase at a lower rate of 2.3 percent this year to $242,700.

"Although housing inventories have been improving, the balance is still a bit more favorable for sellers and annual appreciation remains in double-digit (percentage) territory," NAR President Thomas M. Stevens said. "Even so, the market is in a process of normalization — appreciation will return to normal single-digit patterns."

NAR's projections included assumptions of gross domestic product growth of 3.7 percent in 2006, and an average unemployment rate of 4.8 percent over the year.

"Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect," David Lereah, NAR's chief economist, said.

Lereah expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year.

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