Sales of existing homes will bottom out at about 5.92 million units in 2007, down 8.6% from last year’s levels, according to the National Association of Realtors. The group foresees a 5.9% recovery next year, to about 6.27 million existing homes sold.
Existing-home prices are likely to slip 1.7% to a median $218,200 this year before rising 2.2% in 2008 to $223,000.
“The mortgage markets will calm further in the months ahead, but it’s important to underscore the fact that conventional loans – the vast majority of available financing – are available to creditworthy borrowers,” Lawrence Yun, NAR senior economist said.
NAR sees new home sales dropping 23.7% this year to 801,000 units, and slipping another 7.5% in 2008 to 741,000 units. The median new-home price is estimated to drop 2.2% to $241,100 in 2007, and then increase 1.7% next year to $245,100.
The group pegs 30-year fixed-rate mortgages at 6.4% for the balance of the year and up to the 6.5% range in 2008. “We expect the Fed to cut rates two times before the end of the year, which will lower interest rates for prime borrowers and FHA-insured loans,” Yun said.
Growth in the U.S. gross domestic product (GDP) is forecast by NAR at 2.0% in 2007, and at 2.7% in 2008. The unemployment rate is expected to average 4.6% for 2007, unchanged from last year. Inflation, as measured by the Consumer Price Index, is predicted to be 2.8% in 2007, while inflation-adjusted disposable personal income is likely to increase 3.6% by the end of 2007