- The Washington Times - Wednesday, September 12, 2007

ASSOCIATED PRESS

A trade group for real estate agents yesterday lowered its forecast for 2007 existing-home sales for the seventh straight month, predicting a drop of 8.6 percent from last year.

The revised monthly prediction of the National Association of Realtors calls for U.S. existing-home sales of 5.9 million this year, down from 6.5 million last year. The forecast was below last month’s prediction of a 6.8 percent drop.

This year’s sales would be the lowest since 2002, when sales hit 5.6 million. Home sale prices this year are forecast to drop 1.7 percent to a median of $218,200.

Next year, the trade group expects existing-home sales to climb to 6.3 million. It forecasts new-home sales will fall 24 percent to 801,000 this year and 741,000 next year.

Delinquencies among borrowers with weak credit have risen dramatically over the past year, and other loans are showing weakness as well.

Lawrence Yun, NAR’s senior economist, said lower sales are related to the ongoing problems in the mortgage market for people with weak credit and a lack of funding for jumbo home loans exceeding $417,000.

Those loans can’t be packaged into securities sold to investors by government-sponsored mortgage giants Fannie Mae and Freddie Mac. Lenders have been charging higher rates for these loans because they are not backed by Fannie or Freddie.

The real estate trade group described a big cutback in the construction of new homes as a “healthy trend” that will reduce inventory. The group projected construction of new homes will fall to 1.4 million this year from 1.8 million last year.

Last week, NAR said pending sales of existing homes fell in July to the lowest level in nearly six years as borrowers struggled to close on home purchases, particularly in expensive areas.

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