Housing Market to Worsen Through 2007

The National Association of Realtors (NAR) admitted that the subprime mortgage mess will continue to depress the home resale market through the rest of this year. This is based on the Pending Home Sales Index, which has been on a downward trend since last July. The Pending Home Sales Index is based on contract signings, and so can forecast actual home closing for the next few months.

The NAR also forecast, for the first time in 40 years, a decline in home prices for the next 12 months. Median sale prices for existing single family homes will decline to a low of $213,400 in the first quarter of 2008, down 6% from the high of $226,800 in the second quarter of 2006.

Since home prices will have declined so much, the NAR is predicting that sales will start to pick up again by 2008. From a high of 7 million sales in 2005, the resale housing market will decline 10% to a rate of 6.3 million sales in 2007,and recover to a rate of 6.5 million sales in 2008.

What It Means to You

If you are selling your home this year, here are some great ideas from the About.com guide to Homes, Elizabeth Weintraub.

• First, "Selling in a Falling Market".
• If your home has been on the market a while, read this "Avoid Mistakes When Selling in a Slow Market".
• If you are thinking about lowering the price, then read "When Is the Time Right to Reduce Price?"
• And this is good for every homeseller "10 Ways to Increase Traffic to Your Home"

Whatever you do, don't let wishful thinking fool you into waiting and hoping that the market will improve in a few months.

Source: National Association of Realtors, “Pending Home Sales Show Effects of Weather, Possible Subprime Impact", April 3, 2007; "U.S. Economic Outlook", April 2007 (You need Adobe Reader to open).

More on Real Estate and the Economy:

• How Does Real Estate Affect the U.S. Economy?
• Definitions of Commonly Used Real Estate Terms
• A Primer on Interest Rates