Housing Market to Worsen

The National Association of Realtors (NAR) admitted that the subprime mortgage mess will continue to depress the home resale market through the rest of this year. This is based on the Pending Home Sales Index, which has been on a downward trend since last July. The Pending Home Sales Index is based on contract signings, and so can forecast actual home closing for the next few months.

The NAR also forecast, for the first time in 40 years, a decline in home prices for the next 12 months. Median sale prices for existing single family homes will decline to a low of $213,400 in the first quarter of 2008, down 6% from the high of $226,800 in the second quarter of 2006.

Since home prices will have declined so much, the NAR is predicting that sales will start to pick up again by 2008. From a high of 7 million sales in 2005, the resale housing market will decline 10% to a rate of 6.3 million sales in 2007,and recover to a rate of 6.5 million sales in 2008.