The National Association of Realtors expects new single-family home sales to fall 18.9 percent and single-family housing starts to plummet 23 percent this year from 2006 levels, according to the group’s latest forecast.
The median price of new homes is expected to fall 2.3 percent this year, with the median existing-home price falling 1.2 percent compared to 2006, the group also reported.
Existing-home sales are expected to fall 6.8 percent this year to 6.04 million, compared with 6.48 million in 2006, and to rebound to 6.38 million in 2008. The forecast calls for new single-family home sales to reach 852,000 this year, compared with 1.05 million in 2006, and to fall further to 848,000 in 2007.
This latest forecast represents some changing expectations compared to previous forecasts. The association’s previous annual forecast, released in July, anticipated 6.11 million existing-home sales and 865,000 new-home sales in 2007, for example, while calling for a 2.6 percent drop in the median new-home price and a 1.4 percent drop in the median existing-home price.
“More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year,” stated Lawrence Yun, NAR senior economist.
The forecast released today calls for the median existing-home prices to rise 2 percent and for the median new-home price to rise 2.3 percent in 2008 compared to 2007. The association expects existing-home sales to rise 5.6 percent and for new single-family sales to drop 0.5 percent in 2008 compared to 2007.
“Mortgage disruptions will hold back sales over the short term,” Yun stated, and he expects a “modest upturn … for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008.”
The 30-year fixed-rate mortgage is forecast to average 6.7 percent in the fourth quarter and to drop to the 6.5 percent range next year.
Growth in the U.S. gross domestic product is projected to be 1.9 percent this year compared to a 2.9 percent growth rate in 2006, and is expected to reach 2.8 percent in 2008.
The unemployment rate is estimated to average 4.6 percent this year, unchanged from last year. Inflation, as measured by the Consumer Price Index, is forecast at 2.7 percent this year, down from 3.2 percent in 2006, and is forecast to fall to 2.2 percent in 2008. Inflation-adjusted disposable personal income should rise 3.1 percent in 2007, the same rate as last year, and is expected to drop to 2.4 percent in 2008.