NAR Projects More Severe Decline in Housing

National Association of Realtors Getting a Clue
[Note: The NAR provides numbers that are national averages. Local numbers may, and do, vary widely from the numbers given in this press release.]

Home values and housing sales will take an even bigger hit than previously forecast and will not recover to their earlier levels throughout all of 2008, according to the latest economic outlook from the National Association of REALTORS released this week.

While the trade group sees gains in prices in 2008 from the current weak levels, it projects that the median existing-home price will be $224,600 in the fourth quarter of next year. That would still put the price slightly below the record price reading of $225,000 in the third quarter of last year.

The trade group now says it expects a 3.7 percent decline in existing-home prices in the third quarter of 2007 compared to a year earlier, which is worse than the previous forecast of a 2.2 percent decline. And the fourth quarter should see prices down 1.3 percent from a year ago, rather than the one percent drop that was previously forecast.

The group also sees continued weakness in new-home prices, with values down 2.2 percent this year, and down three percent in the first quarter of 2008 compared to the first quarter of this year. The median new-home price is estimated to drop to $241,100 in 2007, and then increase 1.7 percent next year to $245,100.

The group is now forecasting an 8.6 percentage drop in the pace of existing-home sales this year, which is not only worse than its previous estimate of a 6.8 percent decline, but also would top the 8.5 percent drop seen in 2006. While the group believes existing-home sales should rebound 5.8 percent in 2008, that would still leave the volume of sales more than 11 percent below the record sales of 7.1 million seen in 2005. Existing-home sales are projected at 5.92 million this year and then rise to 6.27 million in 2008, compared with 6.48 million in 2006.

New-home sales volume is expected to drop even more sharply, posting a 23.8 percent drop this year, and another 7.4 percent drop in 2008. New-home sales should total 801,000 in 2007 and 741,000 next year, below the 1.05 million in 2006. Housing starts are expected to post similar declines each year.