The National Association of Realtors expects an 18.3 percent drop in housing starts, a 13.9 percent drop in new-home sales and a 2.2 percent decline in existing-home sales this year compared to 2006, according to the trade group’s latest forecast.

“Tighter lending criteria and fallout from the subprime loan debacle will lead to a healthier housing market with greater assurance that owners can handle mortgage adjustments,” the association announced, “but higher loan standards will slow the housing recovery.”

The national median existing-home price is expected to decline 0.7 percent this year to $220,300, following a 1 percent rise last year, while the median new-home price is expected to increase 0.4 percent to $246,200 in 2007 after a 1.8 percent gain last year. In 2008, existing-home prices are expected to increase 1.6 percent and new-home prices are expected to gain 2 percent.

Existing-home sales are expected to total 6.34 million this year and 6.52 million next year, compared with 6.48 million in 2006. New-home sales are expected to total 904,000 this year and 935,000 next year, compared with 1.05 million in 2006. Housing starts are forecast at 1.47 million this year and 1.55 million next year, compared with 1.8 million units in 2006.

David Lereah, chief economist for the Realtor group, said in a statement that most areas of the country can expect minor price gains in 2007 — “the percentage change in median home price is being distorted as the composition of sales shifts geographically from high-cost markets to moderately priced areas.”

The unemployment rate is expected to average 4.6 percent in 2007, the same as last year. Inflation, as measured by the Consumer Price Index, is forecast to decline to 2.1 percent this year, compared with 3.2 percent in 2006. Growth in the U.S. gross domestic product is forecast at 2.3 percent in 2007, down from 3.3 percent last year, according to the NAR forecast. Inflation-adjusted disposable personal income is expected to rise 3.1 percent this year, up from a gain of 2.6 percent in 2006.

Existing-home sales statistics for March will be released April 24, the NAR Pending Home Sales Index is scheduled for release May 1 and the next forecast will be released May 8.

David Lereah, NAR’s chief economist, said the changes are necessary for the long-term health of the housing market. “We want people to be able to stay in their homes with mortgage terms they understand and can handle,” he said. “Simply stated, a loan with the lowest monthly payment probably isn’t in your best interests — borrowers need to understand worst-case scenarios. If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.”

Freddie Mac reported last week that the 30-year fixed-rate mortgage was 6.17 percent. The Realtor group’s forecast calls for the 30-year fixed rate to rise to 6.6 percent by the end of this year.

“Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections,” Lereah stated. “We still forecast 2007 to be the fourth-highest year on record for existing-home sales.”

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