NAR Revises Home Prices, Sales Forecast Down Again

The National Association of Realtors says annual median single family home prices should decline 1.3% to $219,800 in 2007, and not 1% as projected in May, which was a revision of January's predicted 1.2% gain. Despite earlier flat forecasts, the NAR expects a 2.3% decline in new home prices to $240,800 from May's $246,400 projection. Home sales are expected to decline 4.6% from 6.48 million units to 6.18 million, almost double May's -2.7% forecast. New home sales are likely to fall 18.2% to 860,000, revised from -17.8%, and another 18% y/y decline from 2005-2006. Only 1.43 million housing starts are expected, 370,000 less than 2006. Pending sales are down 3.2% in April, and 10% y/y. NAR chief economist Lawrence Yun calls the declines a "temporary distortion" and predicts a 3.7% rise in 2008 sales to 6.41 million units, with existing home sales bottoming in Q2 2007, and new home sales in Q4. Yun thinks existing home prices will rise 1.7% in 2008, preferably with "traditional mortgages" -- a reference to the subprime crisis that's intensifying the housing slump. Online brokerage ZipRealty says inventory is up 29% y/y, with a 6.5 month supply of new homes and an 8.4 month supply of existing homes -- the highest since 1992.

Sources: NAR Press Release, Wall St. Journal I,II, Bloomberg, Washington Post, USA Today
Commentary: Housing Prosperity Just Around Corner? I Don't Think So • The National Association of Realtors Predicts the First Drop in Home Prices Since 1968 • A Look At U.S. Home Price Performance in 20 Markets
Stocks/ETFs to watch: Pulte Homes (PHM), Toll Brothers (TOL), KB Home (KBH), Beazer Homes USA (BZH), Hovnanian Enterprises (HOV), Ryland Group (RYL), iShares Dow Jones U.S. Home Construction (ITB), PowerShares Dynamic Building & Construction (PKB), SPDR Homebuilders (XHB)

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