Though more and more economists are saying that the economy is either in recession or headed that way this year, the National Association of Realtors projects solid economic growth, increasing existing-home sales, and improving housing demand for 2008 in its latest Housing Forecast, released Thursday morning.

The NAR also released its Pending Home Sales Index, which shows a 1.5 percent decrease to a reading of 85.9 for December. The final reading of 2007 was 24.2 percent below the December 2006 level of 113.3. The NAR's index is based on the pending sales of homes once contracts are signed, but before the transaction closes. An index score of 100 is equal to the average level of contract activity in 2001, the first year of the Index.

Throughout the housing downturn, the NAR has been the housing industry's most optimistic prognosticator. Continuing that trend, NAR chief economist Lawrence Yun believes the housing market has been through the worst, and estimates that existing-home sales will start 2008 at an annual rate of 4.9 million, before increasing to an annual rate of 5.8 million in the second half of the year.

"We're seeing a pattern that is consistent with skimming along the bottom of the cycle," Yun said in a statement accompanying the release of the NAR's forecast and Pending Home Sales Index.

NAR projects new-home sales to decline 17.7 percent from 774,000 in 2007 to 637,000 units in 2008, then rise 7.6 percent to 685,000 in 2009. Yun also estimates housing starts will be at 1.08 million units for 2008 before declining to 1.07 million in 2009. Yun says this move to curb starts by home builders over time will help get inventory levels under control.

But many economists say that new-home starts must fall below 1 million units before excess market inventory can be whittled away. Global Insight Chief U.S. Economist Nigel Gault says new-home starts will hit bottom at a seasonally-adjusted annual rate of 850,000 starts in the middle of 2008.

Gault also projects new-home sales to fall below NAR's estimated levels. Gault says only 600,000 new-homes will be sold in 2008, but that number will increase to 740,000 as house prices bottom in 2009, he says.

Yun, in making the case for an increase in existing home sales in the later stages of 2008, says in the NAR's statement that there "clearly is a pent-up demand from buyers who are on the sidelines."

"When the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices," Yun says.

But Gault says the impact of the federal government's fiscal stimulus package may be mixed. Gault does not think that increasing the conforming loan limit to allow Fannie Mae and Freddie Mac to buy and guarantee larger loans will have much of an impact. Congress is currently mulling the option of expanding the size of a loan Fannie or Freddie could buy from $417,000 to as high as $729,750. Gault does see the cuts to the Federal Funds rate and the proposed tax rebates having an impact.

Gault released a report Thursday for Waltham, Mass.,-based Global Insight declaring the United States economy in recession, and projecting GDP to decline by 0.4 percent in the first quarter and by 0.5 percent in the second quarter. Gault says the tax rebate will artificially boost consumer spending in 2008, pushing GDP growth back to 3.4 percent in the third quarter and 2.7 percent in the fourth quarter. But, the economy falls back into the risk of recession in 2009, he says.

The hope, Gault says, is that the cuts in lending rates by the Federal Reserve Board, which typically take time to impact the economy, will spur economic activity in 2009.

"The Fed cuts are like a time-delay capsule, the effect builds up over time," he says. "The tax cuts get pumped in very quickly. It's a sudden jolt, and it does help you temporarily. But it is only temporary. Whereas the Fed is longer-lasting. The Fed cuts will still be helping us in 2009. The stimulus package won't do us any good in 2009."

The risk is that consumers will pull back on spending in the first half of 2009, after they've burned through the extra cash from the tax cut, Gault says.

"That would be the risk, the deeper recession story," he says. "It starts out bad in the beginning, we get a temporary improvement, and then we go down again."