By Christine Dugas
USA Today

Home prices are likely to spring back in the coming months, the National Association of Realtors predicted Thursday after reporting that median prices fell in 73 metro areas in the final three months of 2006.
Last year “was the year of contraction,” said David Lereah, the NAR’s chief economist. “When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices.”

Even in an overall sluggish fourth quarter, 71 areas had price gains, the NAR said. And 14 of those areas saw double-digit year-over-year percentage gains.

CHARTS: Median home prices in 149 metro areas, home sales by state and metro areas ranked by 5-year appreciation

“At least the bottom appears to have already occurred,” says Lawrence Yun, an NAR economist. “It looks like the figures will be improving. Whether or not that will be sustainable is a different question.”

Nationwide, the median sales price for an existing single-family home fell to $219,300 in the fourth quarter, down 2.7% from the same period in 2005.

Several once-sizzling markets in Florida continued to see price declines. The Sarasota-Bradenton-Venice area was worst hit; prices fell 18% in the fourth quarter.

Still, the NAR pointed out that despite the recent downturn in prices, gains for typical single-family homes the past five years have been robust in many metro areas — and explosive in others. In Riverside-San Bernardino-Ontario, Calif., for example, prices have soared 155.3% in the past five years.

Other parts of California have yet to benefit. In the inland areas, many builders who are struggling to move new-home inventory have caused prices to fall sharply, says Leslie Appleton-Young, chief economist of the California Association of Realtors.

Such price drops, though, are starting to lure buyers, a trend that could help lift the overall housing market. “Buyers are responding to seller pricing and incentives, and there’s pent-up demand as a result of buyer hesitation in the second half of 2006,” says Pat Vredevoogd Combs, the NAR’s president.

Among the areas that reported the biggest gains at the end of last year was Atlantic City, which saw a 25.9% jump in home prices in the fourth quarter, compared with the same period in 2005. And Trenton-Ewing, N.J., enjoyed an 18.9% rise in prices. It could post even better results this year.

“Interest rates remain extremely reasonable, and the buyers are out there and they’re buying; they’re not just shopping,” says Rosalie Daniels, broker-owner of RE/Max TriCounty in Hamilton Township, on the outskirts of Trenton. Written contracts for home sales in January 2007, Daniels says, are 35% ahead of the pace of January 2006.

Low mortgage rates should also help boost sales. The average 30-year fixed rate for 2006 was 6.40%; it’s now 6.30%, Freddie Mac said Thursday.