NAR forecast: Resale home prices will fall 1.4% this year

The median price of resale homes is expected to drop another 1.4 percent this year, equaling last year’s decline, and an index tracking pending sales of resale homes hit a record low in February, the National Association of Realtors reported today. The median price of new homes is expected to drop 3.6 percent this year.

Sales of resale single-family homes and condos and co-operatives are expected to drop 4.7 percent this year, to an annual total of 5.39 million sales, according to the Realtor group’s latest housing market forecast. That follows a 12.8 percent decline in 2007 and an 8.5 percent decline in 2006. New-home sales are expected to drop 25.7 percent this year, following a 26.3 percent decline last year and an 18.1 percent decline in 2006.

Single-family housing starts are expected to tumble 34.2 percent this year compared to 2007, topping a 28.6 percent decline last year and a 14.6 percent decline in 2006.

NAR is predicting that a turnaround in the housing market will begin later this year and that the market will show year-over-year gains in sales and prices in 2009. The association predicts that sales of resale homes will rise 6.6 percent in 2009 compared to this year while sales of new single-family homes will rise 4.6 percent.

The median price of resale homes is expected to rise 3.7 percent in 2009 to $223,800, and the median price of new homes is expected to rise 4 percent next year, to $247,800.

NAR expects the Federal Funds Rate to average 2.4 percent this year compared to 5 percent last year, and to rise slightly to a 3 percent average in 2009.

Growth in real gross domestic products projected to be 1.4 percent this year — compared to 2.2 percent in 2007 and 2.9 percent in 2006 — and is expected to rise to 2.4 percent in 2009.

The forecast calls for the 30-year fixed rate mortgage to average 5.9 percent this year and 6.3 percent in 2009, while the one-year adjustable rate is expected to average 5 percent this year and next.

NAR expects housing affordability to rise this year compared to last year, and to fall next year with a projected rise in home prices and a rise in the 30-year fixed rate mortgage.

Also today, NAR reported that its index tracking pending sales of resale homes dropped 21.4 percent in February compared to February 2007.

This Pending Home Sales Index is based on home-sale contracts signed in February, and sales are typically finalized within one to two months of signing.

An index score of 100 matches the level of contract activity in 2001, which was the first year to be examined for the index and the first of five consecutive record years for sales of resale homes.

The index dropped to 84.6 in February — the lowest level on record for the index — which has data dating back to 2001. The February index was down from 107.6 in February 2007 and 86.2 in January 2008.

Regionally, the index dropped 30.3 percent in the South, 25.4 percent in the Northeast, 17.4 percent in the Midwest and 6.1 percent in the West in February compared to February 2007.