Home sales will hit a five-year low this year as wary lenders cut back on loans for many borrowers, a trade group for real estate agents said yesterday.
The National Association of Realtors” revised forecast calls for existing-home sales of 6.04 million in 2007, down 6.8 percent from last year. The forecast was 1 percent lower, or 70,000 fewer homes, than July”s prediction of 6.11 million.
This year”s sales would be the lowest since 2002, when sales reached 5.63 million. Last year”s sales were 6.48 million.
Next year, the trade group expects sales to climb to 6.38 million, up slightly from the forecast it gave in July of 6.37 million.
The forecast comes as delinquencies among borrowers with weak, or subprime, credit have risen dramatically over the past year, and other loans are showing weakness as well.
“With fewer affordable loans available, that will cut back on some of the home buyers who wanted to enter the market,” said Lawrence Yun, the trade group”s senior economist. However, Mr. Yun predicted that demand would rebound next year.
As of May, more than 16 percent of mortgages issued to subprime borrowers were behind on payments by 60 days or more — nearly double last year”s levels, according to research firm First American LoanPerformance.
As delinquencies rise, lenders are reducing the availability of credit to those borrowers.
Those concerns have also extended to the market for “jumbo” loans, or those above the $417,000 individual limit for home mortgages that mortgage giants Fannie Mae and Freddie Mac are allowed to buy. Investors worried about rising mortgage defaults have all but stopped buying mortgage-backed securities.
That market could remain “frozen” for up to a month, said Doug Duncan, chief economist for the Mortgage Bankers Association.
However, Mr. Yun said investors are overreacting by refusing to buy jumbo loans.
Among borrowers with strong credit and jumbo mortgages, delinquencies rose to 0.5 percent in May, from 0.3 percent a year earlier, according to the First American Loan.
While sales fall, some elements of supply are expected to be down as well. More than 1.4 million housing starts, including multifamily units, are forecast this year and in 2008, but that is down from 1.8 million last year.
Median nationwide existing-home prices are expected to fall by 1.2 percent to a median of $219,300 this year before climbing back next year to $223,600. Median new-home prices are projected to fall 2.3 percent to $240,800 this year and then rise to $246,300 in 2008.
By John Solomon
How the government's punishing of the exposure of official wrongdoing can linger for years
Independent voices from the TWT Communities
Television commentary, reviews, news and nonstop DVR catch-up.
Are there profound differences between the Left and the Right? You betcha.
Covering the world of soccer, including the World Cup, Major League Soccer, D.C. United and the English Premier League and other interesting sporting events.
A carefully guided tour through the confusing world of modern bookselling and publishing.
Benghazi: The anatomy of a scandal
Vietnam Memorial adds four names
Cinco de Mayo on the Mall
NRA kicks off annual convention