BOSTON — Mortgage originations are expected to fall 18 percent in 2008, dropping below the $2 trillion mark for the first time since 2000, the Mortgage Bankers Association said Tuesday.

Although economic fundamentals remain sound, housing is “clearly in a deep recession,” said MBA Chief Economist Doug Duncan, briefing reporters at the group’s annual convention in Boston.

Duncan expects the pace of home sales to remain below 2007 levels until late next year, and said prices could continue to decline beyond that before flattening out in 2009. After adjusting for inflation, Duncan said real housing prices could fall by 7 to 8 percent this year and next.

Much depends on what happens in credit markets, where worries about declines in the value of securities backed by mortgage loans have spread to other forms of asset-backed securities, Duncan said. It could be nine months before investors in such securities regain their confidence, he said.

In the mean time, a “massive surplus” of excess housing supply must be worked off before investment in housing picks up.

Duncan said job losses in mortgage lending industry, which has recently shed 60,000 to 70,000 jobs, could total 110,000, reducing employment in the industry from a peak of 505,000 to 400,000 or less.

The MBA forecasts sales of existing homes will fall to 5.14 million in 2008, down 10 percent from an estimated 5.72 million homes this year and a 21 percent drop from 2006 levels. Assuming that credit markets recover, sales of existing homes are projected to rebound to 5.4 million in 2009, Duncan said.

Sales of new homes are expected to fall to 736,000 in 2008, down from an estimated 819,000 in 2007 and 1.05 million last year.

The median price of an existing home could bottom out in 2008 at $212,900, down 4 percent from $221,900 in 2006. The MBA projects the median price of a new home will fall to $235,900 next year, down 4.3 percent from 2006, before rebounding slightly in 2009 to $238,600.

Housing starts are predicted to fall to 1.16 million next year, down 35.5 percent from 2006, before trending back up to 1.27 million in 2009.

The flight of investors from the secondary mortgage market, tightened underwriting guidelines and reduced demand for housing is expected to drive down mortgage originations to $1.89 trillion, down 18 percent from $2.3 trillion this year and 31 percent from 2006. That would be the lowest mortgage origination volume since the $1.1 trillion total tallied in 2000.

It’s not unreasonable to expect the percentage of loans guaranteed by the Federal Housing Administration to double, “especially if securitization doesn’t reemerge in subprime,” Duncan said.

Subprime originations could fall to between $200 billion and $250 billion in 2008, or about one-third of estimates of past years.

When lenders can’t sell loans to investors, they’re forced to hold them on their books, limiting their capacity to make new loans.

Although the Federal Reserve acted appropriately by cutting short-term rates by 50 basis points in September, that doesn’t provide liquidity directly to mortgage markets, Duncan said. The MBA expects rates on fixed-rate mortgages to rise from 6.4 percent now to 6.6 percent by the beginning of 2008.

The Fed has limited room to take further action because weakness in the dollar could increase the threat of inflation. The MBA is forecasting another 25-basis-point reduction in the federal funds rate at the end of the month, which could be the last adjustment needed to reach a “neutral” position affording moderate growth, Duncan said.

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