RISMEDIA, Jan. 19, 2007-(MarketWatch)-Sales of new and existing homes will continue their slide this year, due largely to investors pulling out of the housing market, mortgage-finance company Fannie Mae said this week.
In an economic and housing outlook, Fannie Mae said sales of new homes are expected to drop by 7.1% in 2007, while sales of existing homes are expected to drop 8.1% this year.
Fannie Mae's projections follow similar estimates released Tuesday by the Mortgage Bankers Association. The trade group forecast declines in 2007 of 7% in existing-home sales and 8% in new-home sales.
Fannie economists said the projected sales for 2007 would be the lowest since 2002.
The two-year drop in sales during 2006 and 2007, the economists said, would be the largest since the 1989-1991 housing downturn.
"We expect additional declines later this year as investors continue to leave previously hot housing markets, although the largest drops may be behind us," wrote Fannie economists including chief economist David Berson.
Nation-wide, home prices should fall by between 1% to 2% this year, Berson predicted at a press briefing Wednesday.
However, he said, "most of the United States will probably not see home price declines at all — simply more modest gains." He said the modest gains combined with significant declines in some parts of the country would produce the estimated 1% to 2% overall gain.
Later in the year, an end to the glut of unsold homes may help prices rise, he predicted.
Berson also told reporters at the briefing Wednesday afternoon that the condominium market is suffering as investors are pulling out.
Also, Fannie is projecting drops in mortgage originations for last year and this year.
For 2007, Fannie Mae is predicting a decline of 11.2% in purchase originations. It would follow an estimated drop of 3.1% in 2006.
Refinance activity, meanwhile, is projected to change little this year thanks to refinancing out of upward-adjusting adjustable rate mortgages, or ARMs.
Fannie said total single-family home originations are expected to decline by 7% to $2.33 trillion in 2007 following a drop to $2.5 trillion in 2006.
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