NAR's economist David Lereah says national housing market's drop will only be short-term.

David Lereah, the chief economist for the National Association of Realtors (NAR), stated recently that he believes that the real estate market on a national level will "drop significantly, but it’s not a balloon bursting".

He expects a soft landing for the overall real estate market, with total sales around $6.62 million for 2006, as compared to $7.07 million for last year. He also expects average prices on a nationwide level to increase 5% this year, as compared to 12.5% in 2005.

In an interview with BusinessWeek, Lereah states that since the economy is growing and their are job gains, consumers still have the ability to purchase homes. The housing market is supported by income gains, job creation, consumer confidence and mortgage rates. And the boomers and retirees are also boosting sales, with boomers buying houses and retirees living longer.

Lereah also stated that the health of a local economy tells us whether the real estate market in that area is in good shape or bad shape, and that most are in good shape, including Los Angeles. Areas like San Diego are not in good shape since their economies aren’t thriving, but Lereah says that what’s happening in San Diego will not affect the Los Angeles real estate market.

Lereah predicts that interest rates will not go above 7% this year. Interest rate increases could make some markets where interest-only loans and adjustable mortgages are prevalent somewhat vulnerable, but a moderate increase to 7% should not be significant enough to create much havoc in the local real estate market.

When asked about the "bubble burst", Lereah said "I’m getting tired of all the doomsayers. We live in houses, and our houses aren’t going to crash. This isn’t the stock market… local economies are relatively healthy. There’s job creation… this isn’t a scenario where bubbles burst."

In the Santa Clarita area, the unemployment figures are at an all-time low, which is one indicator that our local economy is relatively healthy.

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