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As the homebuilders stage a mini-rally, as problems in the submerging prime fall off the map, and as we forget about the long-running problems in housing stocks, I am beginning to wonder if there is any point focusing on housing any more?

After all, everything is perfect. Or is it?

The National Association of Realtors are saying that housing prices will fall.

On Tuesday, The National Association of Realtors [NAR] said that home prices are expected to finish down for the year, which would mark the first drop since the group started tracking values in 1968.

[NAR] is projecting a 1 percent decline in the median price of an existing single-family home, to $219,800. The group, in a forecast made a month ago, had previously been expecting a 0.7 percent decline. Prior to that, it had expected a gain of 1.2 percent.

The number of home sales is also expected to dip from 6.48 million in 2006 to 6.29 million in 2007, a drop of 2.7 percent.

Prices of new homes, at a median of $246,400, are expected to remain steady.

That's quite the statement from the biggest housing cheerleaders on the block.

Of course, housing is generally worse than advertised since builders and sellers are offering better terms and incentives, and basically are lowering the price of a house even though the headline price is fairly static.

Also, if the housing market were a continuous market like the stock market instead of a discrete market where it takes months to sell your home, prices would almost certainly be lower.

In reality, housing sales may be falling faster than [NAR] is advertising.

Home Sales

Housing starts have plummeted, and there are a lot more Adjustable Rate Mortgage [ARM] resets ahead of us.

Housing Starts 3-y chart

Source: The National Association of Realtors Predicts the First Drop in Home Prices Since 1968