Home sales forecast more dire

Sales of existing homes in the U.S. will fall further and prices will drop more sharply in 2007 than had been expected, a leading real estate trade association predicted Tuesday.

The National Assn. of Realtors trimmed its sales forecast for the seventh straight month and widened its predicted drop in existing-home values.

Existing-home sales should hit a pace of 5.92 million units this year, down from the 6.04 million units the group had predicted last month.

The national median sales price for existing homes should ease by 1.7% to $218,200 this year. Last month the trade group said prices would slip 1.2%.

The median new-home price will probably fall 2.2% to $241,100 this year, the association said in its monthly economic outlook.

“There’s been an unusual hit to home sales, starting in March when sub-prime problems emerged and more recently when problems spread to jumbo loans, with many potential borrowers on the sidelines,” said Lawrence Yun, the association’s senior economist.

Jumbo loans are above $417,000 and cannot be purchased by government-sponsored enterprises Fannie Mae and Freddie Mac. Investors have avoided those loans as delinquencies and foreclosures have increased in recent months.

The trade association predicted Tuesday that existing-home sales would rise to 6.27 million in 2008 and the median price of such a home would increase by 2.2% to $223,000.

A slackening in the pace of home construction would go a long way toward pulling the sector out of its slump, Yun said.

“A sharp production pullback by home builders deep into 2008 is a healthy trend that will help trim down housing inventory,” he said.