The National Association of Realtors has reduced its home sales forecast for the ninth time this year and said the housing slump will extend into 2008.
Sales of existing homes are expected to fall 8.6 percent in 2007, exceeding the 6.8 percent drop estimated a month ago. New-home sales probably will decline 24 percent on top of an 18 percent fall in 2006, the trade group for real estate brokers said yesterday.
This year's sales would be the lowest since 2002, when sales hit 5.6 million. Home sale prices this year are forecast to drop 1.7 percent to a median of $218,200.
The two-year housing decline is worsening amid a surge in credit costs and the collapse of more than 100 mortgage companies after defaults by homeowners. Federal Reserve policymakers, who meet next week, said at their last session "tighter" credit is putting the U.S. economy at risk.
"There's been an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans," Lawrence Yun, an economist for the group, said in the forecast. Jumbo loans are those over the $417,000 limit guaranteed by Fannie Mae and Freddie Mac and are typically given to borrowers with good credit.
New-home sales won't reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors said the low point would be at the end of this year. Existing-home sales and prices, as well as new-home prices, will increase in 2008, the real estate group predicted. That outlook is more upbeat than an Aug. 30 forecast by Lehman Brothers Holdings Inc. economists and many homebuilding analysts.
"To say home prices are going to go up next year, you have to wonder what the NAR is thinking," said Alex Barron, an analyst who follows homebuilders for the Agency Trading Group Inc. "We're going to see a drop in volume and prices."
The Realtors' forecast came three weeks after the Fed cut the interest rate it charges banks by half a percentage point to 5.75 percent to try to stem the liquidity crisis caused by a surge of subprime mortgage defaults.
President Bush on Aug. 31 directed the Federal Housing Administration to guarantee loans for some delinquent low- and middle-income borrowers.
The U.S. housing decline may last as long as four years, until 2009, Moody's Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991.
The Associated Press contributed to this article.