From the Record:
Demand for new housing is still declining and won’t start to rebound until 2008, the chief economist of the National Association of Home Builders said Wednesday.
“The big question is: Is this ball still rolling downhill? I think it is,” said the economist, David Seiders, in his midyear forecast for the home-construction industry. “We’re dealing with some major problems out there.”
Seiders, speaking from Washington, said the housing market began sliding in 2005, in reaction to the boom that dramatically inflated prices in the first half of this decade.
“That destroyed affordability,” he said.
And “unanticipated and sudden turmoil” in the sub-prime mortgage market this year has further weakened the outlook for the rest of this year and 2008, Seiders said. With overextended borrowers struggling to repay their mortgages, lenders have tightened their lending standards. As a result, fewer borrowers are able to get mortgages, dampening demand for houses.
Moreover, many would-be home buyers are reluctant to buy now because they believe prices have further to drop. Seiders predicted prices for existing single-family houses, as measured by the Standard & Poor’s Case-Shiller Index, will bottom out in the last quarter of this year, down about 8 percent to 10 percent from 2005’s peak.
In the Northeast, sales of existing homes were down 7.3 percent from a year ago. The NAR will release second-quarter sales figures for existing homes in New Jersey in mid-August.
“It appears that some buyers are looking for more signs of stability before they have enough confidence to make an offer,” said Lawrence Yun, senior economist for the Realtors.
Yun forecasts that sales of existing homes will fall by 5.6 percent this year, to 6.11 million, with prices dropping by 1.4 percent, to a median $218,800. That would be the first annual price decline on record.