The National Association of Realtors this morning (July 11) added another percentage point to its forecast of the drop in 2007 existing-home sales and projected that new-home sales will fall 17.6%.

The NAR said it now expects existing-home sales to drop 5.6% to 6.11 million in 2007 from 6.48 million in 2006, with sales rebounding somewhat to 6.37 million in 2008. The realtor group revised its projection for new-home sales upward to a decline of 17.6% to 865,000 from last year's 1.05 million. Last month, the NAR was forecasting a drop of more than 18% in new-home sales. For 2008, the group predicts new-home sales will rise to 878,000, down from last month's forecast of 901,000.

NAR puts 2007 housing starts at 1.43 million units and 1.44 million in 2008, down from 1.80 million last year.

The group projects a 1.4% decline in the median sales price of existing homes, to $222,700, and a 2.6% drop in the median price of new homes, to $240,100. In 2008, the NAR believes existing home prices will rise 1.8% and new home prices will increase 2.2%.

Lawrence Yun, senior economist for NAR, said the increases next year will be due largely to builders working off excess inventory and reducing spec construction. "With profit margins coming under pressure, homebuilders will limit new construction well into 2008," he said. "This should help the overall inventory level to move steadily into a more balanced state."

Yun added, "Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008."

Among the NAR's other economic forecasts: Mortgage rates should average 6.7% for the rest of 2007 and "fluctuate" around 6.6% next year; GDP growth will come in at 2.0% in 2007, down from 3.3% last year, and rise to 2.8% in 2008; unemployment will remain steady at 4.6% for 2007; inflation will run at a 2.6% rate; and disposable income should rise 3% this year.