Sales of U.S. existing homes will fall further and prices will drop more sharply in 2007 than earlier expected, a leading real estate trade association predicted Tuesday.
The National Association 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 it predicted last month.
The national median sales price for existing homes should ease by 1.7 percent to $218,200 this year. Last month the trade group said prices would slip 1.2 percent.
The median new-home price will probably fall 2.2 percent to $241,100 this year, the NAR said in its monthly economic outlook.
"There's been a an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans, with many potential borrowers on the sidelines," said Lawrence Yun, NAR 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 while the median price of such a home would increase by 2.2 percent to $223,000.
A slackening in the pace of new home construction would go a long way to pull the sector out of its current slump, Yun said.
"A sharp production pullback by homebuilders deep into 2008 is a healthy trend that will help trim down housing inventory," he said in a statement.