According to Larry Knapp, president and COO of Alain Pinel Realtors, that means it's more important than ever to work with a Realtor to provide knowledgeable expertise during a real estate transaction.

"After death and divorce, moving is the third most traumatic event," said Knapp. "Buying a home is the single biggest financial investment people make. We work with families at a very emotional time, dealing with a large amount of their money. A successful agent will make that transaction seamless."

At a recent meeting of the Los Gatos/Saratoga District Silicon Valley Association of Realtors, Knapp also told members that 2006 will continue to be a strong year for sales, but they will likely need to use more of their skills this year compared to the past few years of quick sales and multiple offers.

"This is a very competitive business, and if you can provide the kind of service where the customer is satisfied, you provide added value," Knapp told the group. "At the end of the experience the best comment you can hear from the client is that they hardly noticed because it went so smooth."

Home sales this year are expected to stay below the peak levels in 2005 but will remain historically strong, according to the National Association of Realtors.

David Lereah, the association's chief economist, said the sales slowdown has already occurred. "Right now, home sales are a little lower than projected, but they can be sustained around current levels," Lereah said. "Sometimes people lose sight of the fact that real estate is cyclical. Even so, sales will continue at a historically high pace with modestly higher interest rates as the year progresses, and 2006 is forecast to be the third strongest year on record."

Existing-home sales are likely to decline 4.7 percent to 6.74 million this year, down from a record 7.07 million units in 2005, while new-home sales are expected to fall 8.5 percent to 1.17 million from a record 1.28 million in 2005; both sectors would see their third best year after the totals for 2005 and 2004. Housing starts are seen at 1.87 million units in 2006, down 9.3 percent from 2.06 million last year.

The 30-year fixed-rate mortgage should rise to 6.9 percent by the end of the year.

National Association of Realtors President Thomas M. Stevens said home sellers are making some adjustments. "It's easy to understand that sellers have taken it for granted that it would be fairly easy to sell without much compromise during the recent sales boom."

Now that buyers have more choices, it's even more important for sellers to seek advice from real estate professionals, Stevens said.

"Pros can recommend the right mix of improvements to maximize return, as well as bridge the differences between buyers and sellers that often arise in the negotiation process. Consumers should keep in mind that not all real estate agents are Realtors, who subscribe to a strict code of ethics," he said.

The national median existing-home price for all housing types is expected to increase 5 percent this year to $219,200. At the same time, the median new-home price is projected to rise 5.7 percent to $250,900.

Inflation as measured by the Consumer Price Index is forecast at 3.1 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.9 percent this year.

Growth in the U.S. gross domestic product is seen at 3.4 percent in 2006. The unemployment rate should average 4.8 percent this year.

Another index based on pending sales of existing homes shows home sales are slow but are expected to recover in the months ahead.

The Pending Home Sales Index, based on contracts signed in December, was down 3 percent in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of last August.

The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.

David Lereah, chief economist for the National Association of Realtors, said momentum in the market shifts slowly.

"Changes in the overall direction of the housing market are akin to a large ship making course corrections--it takes some time for the driving factors to materialize as a change in the sales level," he said. "In many recent transactions, we're looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected."

Even with an upturn in sales, Lereah expects the housing market to stay below last year's record. "We're going through a period of adjustment. As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment."