The National Association of Realtors again lowered its forecast for 2007 existing-home sales today, following a downward adjustment last month, and also lowered expectations for home prices.
Existing-home sales are expected to fall 4.6 percent this year to 6.18 million, compared with 6.48 million in 2006, with new single-family home sales dropping 18.2 percent and housing starts dropping 20.4 percent. Housing starts for single-family units are expected to decline 23 percent this year compared to 2006.
Existing-home sales are expected to rise to 6.41 million in 2008, while new single-family sales are expected to rise from 860,000 this year to 901,000 in 2008 and total housing starts are expected to rise from 1.43 million this year to 1.49 million in 2008, the Realtor group reported.
Median existing-home prices are expected to drop 1.3 percent this year to $219,100, while new-home prices are expected to fall 2.3 percent to $240,800, according to the association’s latest forecast. The forecast calls for home prices to recover in 2008, with the existing-home price rising 1.7 percent and the new-home price rising 2.6 percent compared to 2007.
In its previous forecast released in May, the group had forecast that median existing-home prices were expected to fall 1 percent this year while new-home prices were expected to remain roughly flat compared to last year.
The latest forecast also represents a significant shift from the association’s 2007 forecast in January, which projected the median existing-home price to rise 1.5 percent and the new-home price to rise 3 percent his year.
Lawrence Yun, senior economist for the National Association of Realtors, said in a statement, “Because of reductions in home sales and new-home construction, the economy will expand at a subpar pace in 2007,” though he expects the economy to “reach back to its growth potential next year.”
The 30-year fixed-rate mortgage is likely to increase to 6.6 percent in third-quarter 2007 and then hover at that level through 2008, according to the group’s projections.
The unemployment rate is projected to average 4.6 percent in 2007, which is flat compared to 2006, and then rise to 4.8 percent in 2008.
Inflation, as measured by the Consumer Price Index, is expected to decline to 2.5 percent this year, down from 3.2 percent in 2006, and to fall to 2.4 percent in 2008. Inflation-adjusted disposable personal income is likely rise 2.8 percent this year, compared with a 2.6 percent increase in 2006, and then fall back to 2.6 percent in 2008.