After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turn around by summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

"With all the wild projections by academics, Wall Street analysts, and others in the media, it appears that much of the housing sector is experiencing a soft landing," Lereah says. "Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you're in it for the long haul, housing is a sound investment."

Soft Landing for Housing

The unemployment rate is likely to average 4.8 percent in 2007, following a rate of 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.2 percent 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is seen at 2.5 percent in 2007, compared with 3.3 percent last year.

Inflation-adjusted disposable personal income should grow 3.4 percent this year, following a rise of 2.7 percent in 2006.