|**UNITED STATES**                                                                                                                                                           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**SECURITIES AND EXCHANGE COMMISSION**                                                                                                                                      
|**WASHINGTON, D.C.  20549**                                                                                                                                                 
|                                                                                                                                                                            
|**FORM 10-Q**                                                                                                                                                               
|                                                                                                                                                                            
|(Mark One)                                                                                                                                                                  
|QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE                                                                                                                     
|SECURITIES EXCHANGE ACT OF 1934                                                                                                                                             
|For the quarterly period ended June 30, 2006                                                                                                                                
|OR                                                                                                                                                                          
|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF                                                                                                                        
|THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                         
|For the transition period from ________ to _________                                                                                                                        
|                                                                                                                                                                            
|Commission file number  001-13487                                                                                                                                           
|                                                                                                                                                                            
|                                                                                                                                                                            
|**NATIONAL HEALTH REALTY, INC.**                                                                                                                                            
|(Exact name of registrant as specified in its charter)                                                                                                                      
|                                                                                                                                                                            
|                                                                                                                                                                            
|Maryland                                                                                                                                                                    
|(State or other jurisdiction of incorporation                                                                                                                               
|or organization)                                                                                                                                                            
|                                                                                                                                                                            
|100 Vine Street                                                                                                                                                             
|Murfreesboro, TN                                                                                                                                                            
|37130                                                                                                                                                                       
|(Address of principal executive offices)                                                                                                                                    
|(Zip Code)                                                                                                                                                                  
|                                                                                                                                                                            
|(615) 890-2020                                                                                                                                                              
|Registrant's telephone number, including area code                                                                                                                          
|                                                                                                                                                                            
|Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or                                                              
|15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that                                                                
|the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past                                                        
|90 days.  Yes X      No                                                                                                                                                     
|                                                                                                                                                                            
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
|Large accelerated filer                                                                                                                                                     
|                                                                                                                                                                            
|Indicate by check mark whether the registrant is a shell company (as is defined in Rule 12b-2 of the Exchange                                                               
|Act). Yes      No X                                                                                                                                                         
|                                                                                                                                                                            
|9,949,463shares of common stock were outstanding as of August 8, 2006                                                                                                       
|                                                                                                                                                                            

PART I.  FINANCIAL INFORMATION

|**Item 1.  Financial Statements.**                    |               |             
|----------------------------------------------------- | ------------- | ------------
|                                                      |               |             
|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES        
|                                                      |               |             
|INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS        
|*(in thousands, except share amounts)*               
|                                                      |               |             
|                                                      | June 30,      | December 31,
|                                                      | 2006          | 2005        
|                                                      | *(unaudited)* |             
|ASSETS                                                |               |             
|Real estate properties:                               |               |             
|Land                                                  | $ 19,464      | $  19,464   
|Buildings and improvements                            | 147,768       | 147,768     
|                                                      | 167,232       | 167,232     
|Less accumulated depreciation                         | (55,024)      | (52,178)    
|Real estate properties, net                           | 112,208       | 115,054     
|                                                      |               |             
|Mortgage and other notes receivable                   | 12,848        | 13,207      
|Interest and rent receivable                          | 166           | 247         
|Cash and cash equivalents                             | 9,035         | 8,169       
|Marketable securities                                 | 6,050         | 5,841       
|Other assets                                          | 178           | 237         
|Total Assets                                          | $140,485      | $142,755    
|                                                      |               |             
|LIABILITIES                                           |               |             
|Term note payable                                     | $    9,600    | $  10,450   
|Accounts payable and other accrued expenses           | 1,547         | 1,513       
|Accrued interest                                      | 49            | 52          
|Dividends payable                                     | 3,306         | 4,299       
|Distributions payable to minority interest partners   | 404           | 526         
|Minority interest in consolidated subsidiaries        | 13,453        | 13,525      
|Total Liabilities                                     | 28,359        | 30,365      
|                                                      |               |             
|Commitments, contingencies and guarantees             |               |             
|                                                      |               |             
|STOCKHOLDERS' EQUITY                                  |               |             
|Cumulative convertible preferred stock,               |               |             
|$.01 par value; 5,000,000 shares                      |               |             
|authorized; none issued and outstanding               | --            | --          
|Common stock, $.01 par value;                         |               |             
|75,000,000 shares authorized; 9,944,463 and 9,939,463 |               |             
|shares, respectively, issued and outstanding          | 100           | 99          
|Capital in excess of par value of common stock        | 138,570       | 138,468     
|Cumulative net income                                 | 82,954        | 76,918      
|Cumulative dividends                                  | (112,065)     | (105,453)   
|Unrealized gains on marketable securities             | 2,567         | 2,358       
|Total Stockholders' Equity                            | 112,126       | 112,390     
|Total Liabilities and Stockholders' Equity            | $140,485      | $142,755    

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.*

*The interim condensed balance sheet at December 31, 2005 is derived from the audited financial statements at that date.*

|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES        
|-----------------------------------------------------
|                                                     
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
|*(unaudited)*                                        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|share amounts)                                       
|REVENUES:                                            
|Rental income                                        
|Mortgage interest income                             
|                                                     
|EXPENSES:                                            
|Interest                                             
|Depreciation of real estate                          
|General and administrative                           
|                                                     
|                                                     
|INCOME BEFORE MINORITY INTEREST IN CONSOLIDATED      
|SUBSIDIARIES AND NON-OPERATING INCOME                
|                                                     
|NON-OPERATING INCOME (investment and interest income)
|                                                     
|MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES       
|                                                     
|NET INCOME                                           
|                                                     
|NET INCOME PER COMMON SHARE:                         
|Basic                                                
|Diluted                                              
|                                                     
|WEIGHTED AVERAGE COMMON                              
|SHARES OUTSTANDING:                                  
|Basic                                                
|Diluted                                              
|                                                     

**The accompanying notes to interim condensed consolidated financial statements are an integral part of these
financial statements.



|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES                                    
|---------------------------------------------------------------------------------
|                                                                                 
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                          
|*(unaudited)*                                                                    
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            
|Net income                                                                       
|Adjustments to reconcile net income to net cash provided by operating activities:
|Equity in losses of unconsolidated investment                                    
|Depreciation of real estate                                                      
|Minority interest in consolidated subsidiaries                                   
|Decrease in interest and rent receivable                                         
|Increase in other assets                                                         
|Increase in accounts payable and accrued liabilities                             
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                        
|                                                                                 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            
|Collection of mortgage notes receivable                                          
|Distribution from unconsolidated investment                                      
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                        
|                                                                                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            
|Payments on term note payable                                                    
|Dividends paid to stockholders                                                   
|Distributions paid to minority interest partners                                 
|Stock option compensation                                                        
|Exercise of stock options                                                        
|NET CASH USED IN FINANCING ACTIVITIES                                            
|                                                                                 
|INCREASE IN CASH AND CASH EQUIVALENTS                                            
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                   
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                         
|                                                                                 
|Supplemental Information:                                                        
|Cash payments for interest expense                                               
|In February 2006, our term note in the amount of $10,450 was                     
|assigned to National Health Investors, Inc.                                      

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.*

|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES                    
|-----------------------------------------------------------------
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005                  
|*(dollars in thousands, except per share amounts)*               
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|BALANCE AT 12/31/04                                              
|Net income                                                       
|Unrealized losses on marketable                                  
|securities                                                       
|Total comprehensive income                                       
|Stock options exercised                                          
|Dividends to common share-                                       
|holders ($.6650 per share)                                       
|                                                                 
|BALANCE AT 6/30/05 *(Unaudited)*                                 
|                                                                 
|BALANCE AT 12/31/05                                              
|Net income                                                       
|Unrealized gains on market-                                      
|able securities                                                  
|Total comprehensive income                                       
|Stock option compensation                                        
|Stock options exercised                                          
|Dividends to common share-                                       
|holders ($.6650 per share)                                       
|                                                                 
|BALANCE AT 6/30/06 *(Unaudited)*                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.

**NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES**

The unaudited financial statements to which these notes are attached include, in our opinion, all normal,
recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows
of National Health Realty, Inc. ("NHR" or "the Company") and its majority owned subsidiaries.  We assume that users
of these interim financial statements have read or have access to the audited December 31, 2005, consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and Results of Operations and that the
adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be
determined in that context.  See our web page at www.nationalhealthrealty.com.  Accordingly, footnotes and other
disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders
on Form 10-K for the year ended December 31, 2005, have been omitted.  This quarter's interim financial information
is not necessarily indicative of the results that may be expected for a full year for a variety of reasons including, but not
limited to, changes in interest rates, rents, operations and the timing of debt and equity financings.

**NOTE 2.  EARNINGS PER SHARE**

Basic earnings per share is based on the weighted average number of common shares outstanding during the
reporting period.

Diluted earnings per share assumes the exercise of stock options using the treasury stock method.

The following table summarizes the earnings and the average number of common shares and common
equivalent shares used in the calculation of basic and diluted earnings per share.

|                                                    | Three Months Ended | Six Months Ended
|--------------------------------------------------- | ------------------ | ----------------
|                                                    | June 30            | June 30         
|                                                    | 2006               | 2005            
|BASIC:                                              |                    |                 
|Weighted average common shares                      | 9,943,199          | 9,871,919       
|                                                    |                    |                 
|Net income available to common stockholders         | $2,933,000         | $ 2,828,000     
|                                                    |                    |                 
|Net income per common share                         | $           .29    | $            .29
|                                                    |                    |                 
|DILUTED:                                            |                    |                 
|Weighted average common shares                      | 9,943,199          | 9,871,919       
|Stock options                                       | 3,636              | 37,057          
|Adjusted weighted-average common shares outstanding | 9,946,835          | 9,908,976       
|                                                    |                    |                 
|Net income available to common stockholders         | $2,933,000         | $ 2,828,000     
|                                                    |                    |                 
|Net income per common share                         | $           .29    | $            .29

**NOTE 3.  COMMITMENTS, CONTINGENCIES AND GUARANTEES**

At such time as our lease with NHC is terminated for any reason, we are contractually committed to purchase
from NHC at fair market value building additions constructed by them at centers owned by us.  Our lease with NHC
currently expires on December 31, 2017, with an option to extend the lease for an additional ten years at fair market
value.

The fair market value of the building additions at the time of the lease termination shall be calculated as the
lesser of (1) the appraised value of the addition or (2) the construction cost incurred by NHC plus 50% of any appraised
value increase over cost.  In addition, NHC agrees, at NHR's request, to finance NHR's purchase of the addition with
a floating rate, interest only note at the prime rate of interest for a period of up to two years.  Additions at five centers
costing approximately $25,597,000 are currently planned.  At June 30, 2006, expansion construction is completed at
one center (cost incurred, $4,000,000) and is underway at the remaining four centers (expected total cost of $21,597,000,
$10,742,000 incurred).  The cost of this potential commitment, if any, cannot be determined at this time.

At December 31, 1997, in order to protect our REIT status, certain NHC unitholders received limited
partnership units of NHR/OP, L.P. rather than shares of common stock of NHR.  As a result of certain unitholders'
involuntary acceptance of NHR/OP, L.P. partnership units to benefit all other unitholders, we have indemnified those
certain unitholders for any tax consequence resulting from any involuntary conversion of NHR/OP, L.P. partnership
units into shares of NHR common stock.  The indemnification expires at such time as the NHR/OP, L.P. unitholders
are in a position to voluntarily convert their partnership units into NHR common stock on a tax free basis without
violating applicable REIT requirements.

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through 860 of
the Internal Code of 1986, as amended (the "Code") and we intend to continue to operate in such a manner, but no
assurance can be given that we will be able to qualify at all times.  If we qualify as a REIT, we will generally not be
subject to federal corporate income taxes on our net income that is currently distributed to stockholders.  This treatment
substantially eliminates the "double taxation" (at the corporate and stockholder levels) that typically applies to corporate
dividends.  Our failure to continue to qualify under the applicable REIT qualification rules and regulations would cause
us to owe state and federal income taxes and would have a material adverse impact on our financial position, results of
operations and cash flows.

**NOTE 4. MORTGAGE AND OTHER NOTES RECEIVABLE**

The following is a summary of the terms and amounts of mortgage and other notes receivable:

|             |                                             |               | Principal Amount 
|------------ | ------------------------------------------- | ------------- | -----------------
|             |                                             |               | Outstanding as of
|Final        |                                             | Interest Rate | June 30, 2006    
|Payment Date | Payment Terms                               | at 6/30/06    | *(In Thousands)* 
|             |                                             |               |                  
|2016         | Monthly payments of $43,318, which          |               |                  
|             | includes interest at the prime rate plus 2% | 10.25%        | $ 4,504          
|             |                                             |               |                  
|2014         | Monthly payments of $38,250, which          |               |                  
|             | includes interest at 8.5%                   | 8.50%         | 4,133            
|             |                                             |               |                  
|2016         | Monthly payments of $7,845, which includes  |               |                  
|             | interest at the prime rate plus 2%          | 10.25%        | 493              
|             |                                             |               |                  
|2007         | Monthly payments of $72,800, which          |               |                  
|             | includes interest at 10.5%, plus balance    |               |                  
|             | due March 31, 2007                          | 10.50%        | 2,026            
|             |                                             |               |                  
|2007         | Monthly payments of $10,400, which          |               |                  
|             | includes interest at 10.5%, plus balance    |               |                  
|             | due March 31, 2007                          | 10.50%        | 419              
|             |                                             |               |                  
|2007         | Monthly payments of $46,800, which          |               |                  
|             | includes interest at 10.5%, plus balance    |               |                  
|             | due March 31, 2007                          | 10.50%        | 1,273            
|             |                                             |               |                  
|             | Weighted Average Interest and Total         | 9.76%         | $12,848          

**NOTE 5.  INVESTMENT IN MARKETABLE SECURITIES**

On September 17, 2002, we purchased 225,000 shares of National Health Investors, Inc. ("NHI") common
stock for approximately $3,483,000.  At June 30, 2006, the fair value of the shares is $6,050,000 using quoted market
prices.  This investment in marketable securities is classified as an investment in securities available for sale. Unrealized
gains and losses on available for sale securities are recorded as a component of stockholders' equity in accordance with
SFAS No. 115.

**NOTE 6.  STOCK OPTION PLAN**

The Compensation Committee of the Board of Directors ("the Committee") has the authority to select the
participants to be granted options; to designate whether the option granted is an incentive stock option ("ISO"), a non-qualified option, or a stock appreciation right; to establish the number of shares of common stock that may be issued
upon exercise of the option; to establish the vesting provision for any award; and to establish the term any award may
be outstanding.  The exercise price of any ISO's granted will not be less than 100% of the fair market value of the shares
of common stock on the date granted and the term of an ISO may not be any more than ten years.  The exercise price
of any non-qualified options granted will not be less than 100% of the fair market value of the shares of common stock
on the date granted unless so determined by the Committee.

Our stockholders have approved the 1997 Stock Option and Appreciation Rights Plan and the 2005 Stock
Option, Restricted Stock and Stock Appreciation Rights Plan under which options to purchase shares of our common
stock are available for grant to our consultants, advisors, directors and employees at a price no less than the market value
of the stock on the date the option is granted.  Grants of options to our directors of 5,000 shares each are granted
automatically on the date of our annual shareholder meeting.  Grants to directors vest immediately when issued and have
a term of five years.  No options except those to our directors are currently outstanding.

The fair value of each option award was estimated on the grant date, using the Black-Scholes option valuation
model with the weighted average assumptions indicated in the following table.  Generally, awards are subject to clift
vesting.  Each grant is valued as a single award with an expected term based upon expected employees and termination
behavior.  Compensation cost is recognized on the straight-line attribution method.  The straight-line attribution method
requires that compensation expense is recognized at least equal to the portion of the grant-date fair value that is vested
at that date.  The expected volatility is derived using daily historical data for periods preceding the date of grant.  The
risk-free interest rate is the approximate yield on the United States Treasury Strips having a life equal to the expected
option life on the date of grant.  The expected life is an estimate of the number of year an option will be held before it
is exercised.

|                         |           |        
|------------------------ | --------- | -------
|                         | 6/30/06   | 6/30/06
|Dividend yield           | 8.60%     | 7.79%  
|Expected volatility      | 23.9%     | 25.4%  
|Expected lives           | 4.3 years | 5 years
|Risk-free interest rate  | 5.01%     | 3.81%  
|Expected forfeiture rate | 0.00%     | 0.00%  

Information regarding stock option activity for the six months ended June 30, 2006 is summarized below:

|                                  |           | Weighted       | Weighted Average         | Aggregate 
|--------------------------------- | --------- | -------------- | ------------------------ | ----------
|                                  | Number    | Average        | Remaining                | Instrinsic
|                                  | of Shares | Exercise Price | Contractual Life (Years) | Value     
|Outstanding December 31, 2005     | 60,000    | 17.29          |                          |           
|Options granted                   | 30,000    | 17.71          |                          |           
|Options exercised                 | (5,000)   | 10.74          |                          |           
|Outstanding June 30, 2006         | 85,000    | 17.82          | 3.72                     | 96,000    
|                                  |           |                |                          |           
|Options exercisable June 30, 2006 | 85,000    | $17.82         | 3.72                     | 96,000    

At June 30, 2006, options to purchase 85,000 shares of common stock are outstanding and exercisable.
Exercise prices on the options range from $14.80 to $19.25 per share.  The weighted average remaining contractual life
of options outstanding at June 30, 2006 is 3.72 years.  At June 30, 2006, options to purchase 1,002,925 additional shares
of common stock may be issued under the stock option plans.   We have reserved 1,061,802 shares of common stock
for issuance under the stock option plan.

The weighted average grant date fair value per share of options granted during the six months ended June 30,
2006 and June 30, 2005 was $1.99 per share and $1.61 per share.  The total intrinsic value of stock options exercised
during the six months ended June 30, 2006 was $41,000.

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), "Share-Based
Payment" ("SFAS 123(R)"), using the modified prospective application transition method.  Under this method,
compensation cost is recognized, beginning January 1, 2006, based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date, and based on Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation ("SFAS 123"), for all awards granted to employees prior to January 1,
2006 that remain unvested on the effective date.  Prior to January 1, 2006, we applied Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for
our employee stock benefit plans.  Accordingly, no compensation cost was recognized for stock options granted under
the plans because the exercise prices for options granted were equal to the quoted market prices on the option grant dates
and all option grants were to employees or directors.  Results for prior periods have not been restated.

As a result of adopting SFAS 123(R), income before taxes for the quarter and six months ended June 30, 2006
was $967,000 and $762,000, respectively, lower than if we had continued to account for share-based compensation
under APB 25.  SFAS 123(R) requires that the benefits of tax deductions in excess of amounts recognized as
compensation cost be reported as a financing cash flow, rather than an operating cash flow, as required under prior
accounting guidance.  Tax deductions in excess of amounts recognized as compensation costs of $131,000, respectively,
were reported as financing cash flows for the three months and six months ended June 30, 2006 and in operating cash
flows in the amounts of $90,000 and $207,000 for the quarter and six months ended June 30, 2005, respectively.

For periods prior to adoption of SFAS 123(R), SFAS 123 required us to determine pro forma net income and
earnings per share as if compensation cost for our employee stock option and stock purchase plans had been determined
based upon fair values at the grant dates.  These pro forma amounts for the three months and six months ended June
30, 2005 are as follows:

|                                                   | **Three
Months
Ended | Six
Months
Ended
|-------------------------------------------------- | -------------------- | ----------------
|                                                   | June 30              | June 30         
|                                                   | 2005                 | 2005            
|*(dollars in thousands, except per share amounts)*
|Net income - as reported                           | $2,828               | $5,611          
|Net income - pro forma                             | 2,763                | 5,548           
|                                                   |                      |                 
|Net earnings per share - as reported               |                      |                 
|Basic                                              | $   .29              | $   .57         
|Diluted                                            | $   .29              | $   .57         
|                                                   |                      |                 
|Net earnings per share - pro forma                 |                      |                 
|Basic                                              | $   .28              | $   .57         
|Diluted                                            | $   .28              | $   .56         

**NOTE 7.  TERM NOTE PAYABLE**

In May 2004, we entered into a $17,000,000 bank term loan agreement.  The proceeds of the loan were used
to repay a note payable to NHC in the approximate amount of $14,922,000 (interest rate of LIBOR +2.25% with a floor
of 4%) and a senior secured note payable to NHC in the approximate amount of $1,723,000 (interest rate of 8.4%).  The
term note payable required monthly interest payments at the interest rate of 30 day LIBOR plus 1.50%.  Quarterly
principal payments in the amount of $425,000 were required until maturity (May 14, 2007) at which time the entire
outstanding principal balance was to be due.

On February 3, 2006, our bank term loan was assigned to National Health Investors, Inc. and certain terms of
the loan were amended.  The assigned loan as amended requires monthly interest payments to NHI at the interest rate
of 30 days LIBOR plus 1.00% (6.13% at June 30, 2006).  The unpaid principal ($9,600,000 at June 30, 2006) is due
to NHI at maturity (January 2, 2008).

**NOTE 8.  NEW ACCOUNTING PRONOUNCEMENTS**

In May 2005, the FASB issued FASB Statement No. 154, *Accounting for Changes and Error Corrections*.  This
new standard replaces APB Opinion No. 20, *Accounting Changes* and FASB Statement No. 3, *Reporting Accounting
Changes in Interim Financial Statements*.  Statement 154 requires that a voluntary change in accounting principle be
applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it
is impracticable to do so.  Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in
accounting principle, and (2) correction of errors in previously issued financial statements should be termed a
"restatement".  We have adopted the new standard effective for accounting changes and correction of errors made in
fiscal years beginning January 1, 2006.  Adoption of this pronouncement has not had a significant impact on the
Company's consolidated financial statements.

In February 2006, the FASB issued FAS No. 155, "Accounting for Certain Hybrid Financial Instruments -
an amendment to FASB Statements No. 133 and 144" (FAS 155).  FAS 155 simplifies the accounting for certain hybrid
financial instruments containing embedded derivatives.  FAS 155 allows fair value measurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require bifurcation under FAS 133.  In addition,
it amends FAS 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative financial instrument.  The Company will
adopt the provisions of FAS 155 beginning in fiscal 2007.  The implementation of FAS 155 is not expected to have a
material impact on the Company's consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets - an
amendment of FASB Statement No. 140."  This Statement amends FASB Statement No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," with respect to the accounting for separately
recognized servicing assets and servicing liabilities.  This Statement clarifies when servicing rights should be separately
accounted for, requires companies to account for separately recognized servicing rights initially at fair value, and gives
companies the option of subsequently accounting for those servicing rights at either fair value or under the amortization
method.  SFAS 156 is effective for fiscal years beginning after September 15, 2006.  The implementation of FAS 156
is not expected to have a material impact on the Company's consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes
- An Interpretation of FASB Statement No. 109."  FIN 48 prescribes a recognition threshold and measurement attribute
for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions
that the company has taken or expects to take on a tax return.  FIN 48 will require that the financial statements reflect
expected future tax consequences of such positions presuming the taxing authorities' full knowledge of the position and
all relevant facts, but without considering time values.  FIN 48 is effective for annual periods beginning after December
15, 2006.  We are currently evaluating the impact of adopting FIN 48 on our financial statements.  Upon adoption, the
cumulative effect of applying the provision of FIN 48 will be reported as an adjustment to the opening balance of
retained earnings for that fiscal year.

**Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.**

OVERVIEW

National Health Realty, Inc. (NHR or the Company) is a real estate investment trust (REIT) that began
operations on January 1, 1998.  Currently our assets, through our subsidiary NHR/OP, L.P. (the Operating Partnership),
include the real estate of 23 health care facilities, including 16 licensed skilled nursing facilities, six assisted living
facilities and one independent living center (the Health Care Facilities).  We also own six first and second mortgage
promissory notes with outstanding principal balances totaling $12,848,000 (the Notes) at June 30, 2006 and secured by
the real property of the health care facilities.  Our revenues are derived primarily from rent and interest income from
these real estate properties and mortgage notes receivable.  Our primary lessee is National HealthCare Corporation
(NHC) which leases 14 of our 23 properties and guarantees the lease payments on the remaining nine properties.

*Areas of Focus*

Management is currently focusing upon our capacities as landlord and note holder.  Our objectives are (1) to
provide current income for distribution to stockholders, (2) to provide the opportunity for additional returns to investors
by participating in any increase in the operating revenues of our leased properties; (3) to provide the opportunity to
realize capital growth resulting from appreciation, if any, in the value of our portfolio properties; and (4) to preserve
and protect stockholder's capital.  We can offer no assurance that these objectives will be realized.

NHR's quarterly common stock dividend of 33.25 cents per share is expected to remain unchanged for the near
future except for any adjustments required to reduce our federal income taxes and/or to assure that we qualify to be
taxed as a REIT under the Internal Revenue Code.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted  in the
United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and
cause our reported net income to vary significantly from period to period.

Our significant accounting policies and the associated estimates and the issues that impact these estimates are
as follows:

*Revenue Recognition - Mortgage Interest and Rental Income*

We collect interest and rent from our customers.  Generally our policy is to recognize revenues on an accrual
basis as earned.  However, we may in the future determine that, based on insufficient historical collections and the lack
of expected future collections, revenue for interest or rent is not realizable.  For any such nonperforming investments,
our policy is to recognize interest or rental income only in the period when payments are received.  If conclusions as
to the realizibility of revenue change, our revenues could vary significantly from period to period.

*Valuations of and Impairments to Our Non-Marketable Investment*s

Decisions about valuations and impairments of our investments require significant judgments and estimates
on the part of management.  We monitor the liquidity and credit worthiness of our tenants and borrowers on an ongoing
basis.  For real estate properties, the need to recognize an impairment is evaluated on a property by property basis in
accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" (SFAS 144).  Recognition of an impairment is based upon estimated undiscounted future cash
flows from a property compared to the carrying value of the property.  For mortgage and other notes receivable,
impairment recognition is based upon an evaluation of the estimated collectibility of loan payments on a specific loan
basis in accordance with Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan - An Amendment of FASB Statements No. 5 and 15".  While we believe that the carrying amounts
of our properties and notes receivable are realizable, it is possible that future events could require us to make significant
adjustments or revisions to these estimates.

*REIT Status and Taxes*

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code") and we intend to continue to operate in such a manner,
but no assurance can be given that we will be able to qualify at all times.  If we qualify as a REIT, we will generally not
be subject to federal corporate income taxes on our net income that is currently distributed to our stockholders.  This
treatment substantially eliminates the "double taxation" (at the corporate and stockholder levels) that typically applies
to corporate dividends.  Our failure to continue to qualify under the applicable REIT qualification rules and regulations
would cause us to owe state and federal income taxes and would have a material adverse impact on our financial
position, results of operations and cash flows.

CAPITAL RESOURCES AND LIQUIDITY

*Term Note Payable*

In May 2004, we borrowed $17,000,000 under a bank term loan with an interest rate of 30 day LIBOR plus
1.5% and a three year term.  The proceeds of the loan were used to repay a note payable to NHC in the approximate
amount of $14,922,000 (interest rate of LIBOR + 2.25% with a floor of 4%) and a senior secured note payable to NHC
in the approximate amount of $1,723,000 (interest rate of 8.4%).  The term note payable required monthly interest
payments plus quarterly principal payments in the amount of $425,000 until maturity on May 14, 2007 at which time
the entire outstanding principal balance is due.

On February 3, 2006, our bank term loan was assigned to National Health Investors, Inc. and certain terms of
the loan were amended.  The assigned loan as amended requires monthly interest payments at the interest rate of 30 days
LIBOR plus 1.00%.  The unpaid principal ($9,600,000 at June 30, 2006) is due at maturity (January 2, 2008).

*Contractual Cash Obligations*

Our contractual cash obligations for periods subsequent to June 30, 2006 are as follows:

|                                   |          | Less than | 2-3    | 4-5      | After 5 
|---------------------------------- | -------- | --------- | ------ | -------- | --------
|(in thousands)                     | Total    | 1 Year    | Years  | Years    | Years   
|Long-term debt - principal         | $  9,600 | $    --   | $9,600 | $     -- | $     --
|Long-term debt - interest          | 888      | 588       | 300    | --       | --      
|Advisory agreement                 | 500      | 500       | --     | --       | --      
|Total contractual cash obligations | $10,988  | $1,088    | $9,900 | $     -- | $     --

Our potential commitment of up to $26,225,000 to purchase bed additions constructed by NHC on our properties
have been excluded from the above table.  Amounts are not estimable and are dependent on events that have not yet
occurred.

We expect that current cash on hand, marketable securities, short-term maturities of mortgage and notes
receivable, operating cash flows, and as needed, our borrowing capacity will be adequate to finance our operating and
financing requirements for 2006 and 2007.

*Sources and Uses of Funds*

Our leasing and mortgage services generated net cash from operating activities during the six months ended June
30, 2006, in the amount of $9,700,000 compared to $9,428,000 in the prior period.  Net cash from operating activities
generally includes net income plus non-cash expenses, such as depreciation and amortization and provision for loan
losses, if any, and working capital changes.  The period to period increase is due primarily to increased rental income
offset in part by reduced mortgage interest income.

Cash flows provided by investing activities totaled $448,000 during the six months ended June 30, 2006,
compared to $134,000 in the prior period.  Collection of mortgage notes receivable provided $359,000 of cash flow in
the current period compared to $134,000 in the same period last year.  Distributions from an unconsolidated investment
provided $89,000 of cash flow in the current period compared to zero in the same period last year.

Cash flows used in financing activities totaled $9,282,000 ($7,497,000 last year) and included payments on long-term debt of $850,000 ($850,000 last year), payments for dividends to stockholders of $7,605,000 ($7,282,000 last year),
and payments for cash distributions to minority interest partners of $930,000 ($906,000 last year) offset in part by
$54,000  proceeds from issuance of common shares in the current year ($1,541,000 last year) and stock option
compensation of $49,000 in the current year (zero last year).

*Dividends*

We intend to pay quarterly distributions to our stockholders in an amount at least sufficient to satisfy the
distribution requirements of a real estate investment trust.  Such requirements necessitate that at least 90% of our taxable
income be distributed annually.  The primary source for distributions will be rental and interest income we earn on the
real property and mortgage notes receivable.

*Debt to Equity Ratio*

At June 30, 2006, our debt as a percentage of total liabilities and capital was 6.8%.

Our current cash on hand, marketable securities, collections on leases and mortgage notes receivable, operating
cash flows and, as needed, our borrowing capacity is expected to be adequate to pay or finance any scheduled debt
reduction, plus our operating requirements for 2006 and into 2007.

RESULTS OF OPERATIONS

*Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005*

Net income for the three months ended June 30, 2006, is $2,933,000 versus $2,828,000 for the same period in
2005, an increase of 3.7%.  Diluted earnings per common share is 29 cents in the 2006 period, compared to 29 cents in
the 2005 period.

Total revenues for the three months ended June 30, 2006, increased $42,000 to $4,980,000 from $4,938,000
for the three months ended June 30, 2005.  Revenues from rental income increased $106,000 or 2.4% when compared
to the same period in 2005.  Revenues from mortgage interest decreased $64,000 or 10.7% in 2006 as compared to the
same period in 2005.

The increase in rental income is due to increased percentage rent.  Percentage rent is calculated at 3% of the
amount by which gross revenues of each leased health care center in each quarter of each year after 1999 exceed the gross
revenues of such health care facility in the applicable quarter of 1999.

The decrease in mortgage interest income is due to the reductions in the principal of mortgage notes due to
regular monthly amortization offset in part due to increased interest rates due to variable rate notes receivable.

Total expenses for the 2006 three month period decreased $23,000 or 1.2% to $1,879,000 from $1,902,000 for
the 2005 three month period.  Interest expense decreased $28,000 or 15.6% in the 2006 three month period as compared
to the 2005 period.  Depreciation of real estate decreased $45,000 or 3.1%.  General and administrative costs increased
$50,000 or 19.7%.

Interest expense decreased due to a $4,000,000 voluntary prepayment of our bank term loan in the fourth quarter
of 2005 as well as regular quarterly payments that reduced the loan balance.  Decreases were offset in part due to the
interest rate on variable rate debt being greater in the 2006 three month period compared to the same period in 2005.

General and administrative expenses increased due primarily to increases in stock compensation expense and
advisory fees.  The adoption of FAS 123R required the expensing of the fair value of options granted and vested in the
quarter.  The increases were offset in part due to decreases in franchise tax expense.

Non-operating income, which is composed of net revenues from investment, loan renewal fee, interest income,
and equity in losses of an unconsolidated investment  increased $52,000 or 37.7% for the three months ended June 30,
2006 compared to the same period in 2005.  Investment and interest income for the three months ended June 30, 2006
includes $108,000 of dividend income, $82,000 of bank interest income, $-0- loan renewal fee and $-0- of equity in
losses of an unconsolidated investment.

*Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005*

Net income for the six months ended June 30, 2006, is $6,036,000 versus $5,611,000 for the same period in
2005, an increase of 7.6%.  Diluted earnings per common share is 61 cents in the 2006 period, compared to 57 cents in
the 2005 period.

Total revenues for the six months ended June 30, 2006, increased $305,000 to $10,143,000 from $9,838,000
for the six months ended June 30, 2005.  Revenues from rental income increased $427,000 or 4.9% when compared to
the same period in 2005.  Revenues from mortgage interest decreased $122,000 or 10.2% in 2006 as compared to the
same period in 2005.

The increase in rental income is due to increased percentage rent.  Percentage rent is calculated at 3% of the
amount by which gross revenues of each leased health care center in each quarter of each year after 1999 exceed the gross
revenues of such health care facility in the applicable quarter of 1999.

The decrease in mortgage interest income is due to the reductions in the principal of mortgage notes due to
regular monthly amortization offset in part due to increased interest rates due to variable rate notes receivable.

Total expenses for the 2006 six month period decreased $114,000 or 3.0% to $3,686,000 from $3,800,000 for
the 2005 six month period.  Interest expense decreased $43,000 or 12.5% in the 2006 six month period as compared to
the 2005 period.  Depreciation of real estate decreased $90,000 or 3.1%.  General and administrative costs increased
$19,000 from the previous period.

Interest expense decreased due to a $4,000,000 voluntary prepayment of our bank term loan in the fourth quarter
of 2005 as well as regular quarterly payments that reduced the loan balance.  Decreases were offset in part due to the
interest rate on variable rate debt being greater in the 2006 six month period.

General and administrative expenses increased due primarily to increases in advisory fees and stock
compensation expense.  The increases were offset due to decreases in audit fees and franchise tax expense.

Non-operating income, which is composed of net revenues from investment, loan renewal fee, interest income,
and equity in losses of an unconsolidated investment  increased $54,000 or 20.7% for the six months ended June 30, 2006
compared to the same period in 2005.  Investment and interest income for the six months ended June 30, 2006 includes
$216,000 of dividend income, $130,000 of bank interest income, $50,000 loan renewal fee and $81,000 of equity in
losses of an unconsolidated investment.

**Funds From Operations**

Our funds from operations ("FFO") for the six months ended June 30, 2006, on a diluted basis was $8,572,000,
an increase of $346,000 as compared to $8,226,000 for the same period in 2005.  FFO represents net earnings available
to common stockholders, excluding the effects of asset dispositions, plus depreciation associated with real estate
investments.  Diluted FFO assumes, if dilutive, the conversion of cumulative convertible preferred stock and the exercise
of stock options using the treasury stock method.

We believe that funds from operations is an important supplemental measure of operating performance for a
real estate investment trust.  Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes
predictably over time.  Since real estate values instead have historically risen and fallen with market conditions,
presentations of operating results for a real estate investment trust that use historical cost accounting for depreciation
could be less informative, and should be supplemented with a measure such as FFO.  The term FFO was designed by the
real estate investment trust industry to address this issue.  Our measure may not be comparable to similarly titled measures
used by other REITs.  Consequently, our funds from operations may not provide a meaningful measure of our
performance as compared to that of other REITs.  Since other REITs may not use our definition of FFO, caution should
be exercised when comparing our Company's FFO to that of other REITs.  Funds from operations in and of itself does
not represent cash generated from operating activities in accordance with generally accepted accounting principles
("GAAP") (funds from operations does not include changes in operating assets and liabilities) and therefore should not
be considered an alternative to net earnings as an indication of operating performance, or to net cash flow from operating
activities as determined by GAAP in the United States, as a measure of liquidity and is not necessarily indicative of cash
available to fund cash needs.

The following table reconciles net income to funds from operations:

|                                                   | Three Months Ended | Six Months Ended
|-------------------------------------------------- | ------------------ | ----------------
|                                                   | June 30            | June 30         
|                                                   | 2006               | 2005            
|                                                   | *(in thousands)*   | *(in thousands)*
|Net income applicable to common stockholders       | $2,933             | $2,828          
|Adjustments:                                       |                    |                 
|Real estate depreciation                           | 1,423              | 1,468           
|Minority interest in NHR/OP, L.P. share            |                    |                 
|of add back for real estate depreciation           | (155)              | (161)           
|Funds from operations                              | $4,201             | $4,135          
|                                                   |                    |                 
|Basic funds from operations                        | $    .42           | $    .42        
|Diluted funds from operations                      | $    .42           | $    .42        
|                                                   |                    |                 
|Shares for basic funds from operations per share   | 9,943,199          | 9,871,919       
|Shares for diluted funds from operations per share | 9,946,835          | 9,908,976       

FUTURE RENTAL AND MORTGAGE INTEREST INCOME UNCERTAINTIES

Our rental and mortgage interest income revenues are believed by management to be secure. However, the
majority of the income of our lessees and borrowers is derived from the lessees' participation in the Medicare and
Medicaid programs.  Adverse changes in these programs or the inability of our lessees and borrowers to participate in
these programs would have a material adverse impact on the financial position, results of operations and cash flows of
our lessees and borrowers and their resultant ability to service their obligations to us.  Additionally, prepayment by our
borrowers of their mortgage notes to us would reduce our future income.

INCOME TAXES

We intend at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended. Therefore, we will not be subject to federal income tax provided we distribute at least 90% of our
annual REIT taxable income to our stockholders and meet other requirements to continue to qualify as a REIT.
Accordingly, no provision for federal income taxes has been made in the consolidated financial statements. Our failure
to continue to qualify under the applicable REIT qualification rules and regulations would have a material adverse impact
on our financial position, results of operations and cash flows.

IMPACT OF INFLATION

Inflation may affect us in the future by changing the underlying value of our real estate or by impacting our cost
of financing operations.

Our revenues are primarily from long-term investments.  Our leases with NHC require increases in rent income
based on increases in the revenues of the leased facilities.

FORWARD-LOOKING STATEMENTS

References throughout this document to "the Company", "we" or "us" include National Health Realty, Inc. and
its subsidiaries.  In accordance with the Securities and Exchange Commission's "Plain English" guidelines, this Quarterly
Report on Form 10-Q has been written in the first person.  In this document, the words "we", "our", "ours" and "us" refer
only to National Health Realty, Inc. and its subsidiaries and not any other person.

This Quarterly Report on Form 10-Q and other information we provide from time to time, contains certain
"forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act of 1995.  All
statements regarding our expected future financial position, results of operations, cash flows, funds from operations,
continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth
opportunities, and similar statements including, without limitations, those containing words such as "believes",
"anticipates", "expects", "intends", "estimates", "plans", and other similar expressions are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual
results in future periods to differ materially from those projected or contemplated in the forward-looking statements as
a result of, but not limited to, the following factors:

*	national and local economic conditions, including their effect on the availability and cost of labor, utilities and
materials;

*	the effect of government regulations and changes in regulations governing the healthcare industry, including
compliance with such regulations by us and our borrowers and/or lessees;

*	changes in Medicare and Medicaid payment levels and methodologies and the application of such
methodologies by the government and its fiscal intermediaries;

*	the ability to pay when due or refinance certain debt obligations when they mature;

*	the competitive environment in which we operate.

See the notes to the quarterly financial statement, and "Item 1.  Business" and "Item 1A.  Risk Factors" as is
found in our 2005 Annual Report on Form 10-K for a discussion of various governmental regulations and other operating
factors relating to the healthcare industry and the risk factors inherent in them.  The Annual Report and Form 10-Q's are
available on our web site at www.nationalhealthrealty.com.  You should carefully consider those risks before making
any investment decisions in the Company.  These risks and uncertainties are not the only ones facing the Company.
There may be additional risks that we do not presently know of or that we currently deem immaterial.  If any of the risks
actually occur, our business, financial condition or results of operations could be materially adversely affected.  In that
case, the trading price of our Common Stock could decline, and you may lose all or part of your investment.  Given these
risks and uncertainties, we can give no assurances that these forward-looking statements will, in fact, transpire and,
therefore, caution investors not to place undue reliance on them.

**Item 3.	Quantitative and Qualitative Disclosures About Market Risk.**

INTEREST RATE RISK

Our cash and cash equivalents consist of highly liquid investments with an original maturity of less than three
months.  Approximately $7,851,000 of our mortgage and other notes receivable bear interest at fixed interest rates.  As
the interest rates on these notes receivable are fixed, a hypothetical 10% change in market interest rates would have no
impact on our future earnings and cash flows related to these instruments.  Approximately $4,997,000 of our notes
receivable bear interest at variable rates (generally at prime plus 2%).  Because the interest rate of these instruments are
variable, a hypothetical 10% change in market interest rates would result in a related increase or decrease in annual
interest income of approximately $51,000.

As of June 30, 2006, all of our debt ($9,600,000) bears interest at variable interest rates.  Because the interest
rates of these instruments are variable, a hypothetical 10% increase in interest rates would result in additional annual
interest expense of $59,000 and a 10% reduction in interest rates would result in annual interest expense declining
$59,000.

We currently do not use any derivative instruments to hedge our interest rate expense or for trading purposes.
The use of such instruments would be subject to strict approvals by our senior officers.  Therefore, our exposure related
to such derivative instruments is not material to our financial position, results of operations or cash flows.

EQUITY PRICE RISK

We consider our investments in marketable securities as available for sale securities and unrealized gains and
losses are recorded in stockholders' equity in accordance with Statement of Financial Accounting Standards No. 115.
The investments in marketable securities are recorded at their fair market value based on quoted market prices.  Thus,
there is exposure to equity price risk, which is the potential change in fair value due to a change in quoted market prices.
Hypothetically, a 10% increase in quoted market prices would result in a related 10% increase in the fair value of our
investments in marketable securities of approximately $605,000 and 10% reduction in quoted market prices would result
in a related 10% decrease in the fair value of our investments in marketable securities of approximately the same amount.
**Item 4.  Controls and Procedures**

As of June 30, 2006, an evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer ("CEO") and Principal Accounting Officer ("PAO"),
of the effectiveness of the design and operation of the Company's disclosure controls and procedures.  Based on that
evaluation, the Company's management, including the CEO and PAO, concluded that the Company's disclosure controls
and procedures were effective as of June 30, 2006.  There have been no changes in the Company's internal control over
financial reporting during the quarter ended June 30, 2006 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.  ****

**PART II.  OTHER INFORMATION**

Item 1.	Legal Proceedings.  None

Item 1A. Risk Factors.

During the six months ended June 30, 2006, there were no material changes to the risk factors that were
disclosed in Item 1A of National Health Realty, Inc.'s Annual Report on Form 10-K for the year ended December 31,
2005.

Item 2.	Unregistered sales of Equity Securities and Use of Proceeds.  Not applicable

Item 3.	Defaults Upon Senior Securities.  None

Item 4.	Submission of Matters to a Vote of Security Holders.

(a)	The annual meeting of the shareholders was held on May 3, 2006.

(b)	Matters voted upon at the meeting were as follows:

PROPOSAL NO. 1: Re-election of Robert G. Adams and Richard F. LaRoche, Jr. to serve as directors for terms of three
years or until their successors have been fully elected and qualified .

|                        |            | Withholding
|----------------------- | ---------- | -----------
|Nominee                 | Voting For | Authority  
|Robert G. Adams         | 8,837,473  | 369,779    
|Richard F. LaRoche, Jr. | 8,818,824  | 388,428    

PROPOSAL NO. 2: To ratify the Audit Committee's selection of BDO Seidman, LLP as independent auditors for the
year ending December 31, 2006.

|Voting For | Voting Against | Abstaining
|---------- | -------------- | ----------
|9,182,078  | 12,129         | 13,043    

Item 5.	Other Information.  None

Item 6.	Exhibits.

(a)	List of exhibits

|Exhibit No. | Description                                                           
|----------- | ----------------------------------------------------------------------
|31.1        | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer     
|            |                                                                       
|31.2        | Rule 13a-14(a)/15d-14(a) Certification of Principal Accounting Officer
|            |                                                                       
|32          | Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive   
|            | Officer and Principal Accounting Officer                              

******SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.

|                   | NATIONAL HEALTH REALTY, INC.    
|------------------ | --------------------------------
|                   | (Registrant)                    
|                  
|                  
|                  
|DateAugust 9, 2006 | /s/Robert G. Adams              
|                   | Robert G. Adams                 
|                   | President                       
|                  
|                  
|                  
|DateAugust 9, 2006 | /s/Donald K. Daniel             
|                   | Donald K. Daniel                
|                   | Senior Vice President/Controller
|                   | (Principal Financial Officer)