The National Association of Realtors expects sales of previously owned homes to fall 10.8 percent this year compared to last year, and for prices to fall 1.3 percent, according to the group’s latest annual forecast.
The Realtor group’s forecast, prepared by Lawrence Yun, its senior economist, also anticipates a 27.1 percent drop in housing starts for single-family units, a 24 percent overall drop in housing starts, a 23.5 percent decline in new single-family home sales, and a 2.1 percent drop in new-home prices this year compared to 2006.
Yun’s forecast calls for sales of 5.78 million previously owned homes this year, compared with 6.78 million sales in 2006. Existing-home sales are expected to grow 5.8 percent, to 6.12 million, in 2008 compared to 2007.
In its previous annual forecast, the Realtor group predicted that existing-home sales would drop 8.6 percent this year compared to 2006 and then rise to 6.27 million in 2008. That report also predicted a 1.7 percent drop this year in the median price of previously owned homes.
The latest forecast calls for housing starts to drop to 1.37 million this year compared with 1.8 million last year, and to drop 9.2 percent in 2008 compared to 2007, to 1.24 million. Single-family housing starts are expected to drop to 1.07 million this year compared with 1.47 million last year, and to sink another 13.7 percent next year to 922,000.
Sales of new single-family homes are expected to fall to 804,000 this year compared with 1.05 million last year, and to drop 6.4 percent next year to 752,000.
The median price of previously owned homes is expected to rebound in 2008, rising 1.3 percent compared to 2007, with the new-home median price rising 1 percent.
Yun said that despite the slowdown compared to 2006, this year is still on pace to be the fifth-highest year on record for existing-home sales, and “a lot of people are, in fact, buying homes,” he stated. “One out of 16 American households is buying a home this year.
“The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs,” he stated. The cutback in home construction “will help lower inventory and firm up home prices,” he added.
The 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then rise to the 6.6 percent range in the second half of 2008. Additional cuts are expected in the Fed funds rate, according to the Realtor group’s forecast.
Growth in the U.S. gross domestic product is expected to be 2 percent this year, below the 2.9 percent growth rate in 2006, and GDP is expected to grow 2.7 percent in 2008.
The forecast calls for the unemployment rate to average 4.6 percent this year, or level with the 2006 rate. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income is expected to rise 3.6 percent in 2007, up from 3.1 percent last year, according to the forecast.