Realtors group lowers housing-sales forecast

WASHINGTON — 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 Wednesday.

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 hit 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 homebuyers who wanted to enter the market," Lawrence Yun, the trade group's senior economist, said in an interview. However, Yun projected that demand would rebound next year.

As of May, more than 16 percent of mortgages issued to subprime borrowers were behind on their 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 worries 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, the Realtors' 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 FirstAmerican LoanPerformance statistics.

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.