U.S. home-price declines this year are going to be steeper than once forecast because of the drop in subprime mortgage lending and stricter loan standards, the National Association of Realtors said.
The 2007 median price for an existing home likely will drop 1 percent from 2006, to $219,800, compared with its earlier forecast of a 0.7 percent decline, the Chicago-based association said in a report Tuesday.
It projects the median price for new homes to fall $100 to $246,400, the first decline since 1991, from a previous estimate of a 0.4 percent increase.
Record-high defaults by subprime borrowers, those with flawed or insufficient credit histories, have prompted mortgage lenders to limit the number of people who qualify for a home loan, according to the Realtors’ report.
At the same time, unemployment is down and household incomes are up, which should help bring a housing recovery in 2007’s third and fourth quarters, the group said.
“If it weren’t for a favorable economic backdrop, housing would probably have a hard landing,” Lawrence Yun, the group’s senior economist, said in the report. “We see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.”
Sales of previously owned homes, 85 percent of the market, probably will total 6.29 million this year, the group said, fewer than the 6.34 million it called for on April 11. New home sales probably will fall to 864,000, fewer than the 904,000 in the month-ago forecast, the association said.
In 2008, home resales are expected to increase to 6.49 million, the highest since the record 7.08 million in 2005.
This year’s mortgage rates probably will be lower than those in 2006, the report said. The average U.S. rate for a 30-year fixed home loan probably will be 6.4 percent, down from 6.5 percent last year, the association said.
