Home sales, prices to slip more this year: NAR

By Patrick Rucker

WASHINGTON (Reuters) - The leading realty trade group on Wednesday cut its 2007 forecast for U.S. home sales and prices, saying both would slide this year with sales hitting a five-year low.

The National Association of Realtors trimmed its sales forecast for the fifth straight month and widened its predicted drop in existing home values for the fourth consecutive month.

The cloudy outlook for the housing sector comes a day after credit ratings agencies said loans offered to borrowers with damaged credit are shakier than earlier thought.

Moody's Investors Service and Standard & Poor's said on Tuesday they had begun to slash ratings on more than $17.3 billion in subprime debt in news that made the stock market sputter.

Subprime loan failures are more widespread and happening faster than the two leading debt-review companies had expected.

Despite the concentrated losses in subprime mortgages and a lagging housing market, a leading Federal Reserve official said Wednesday the national economy should return to steady growth by the end of the year.

"The consequences of the declines in housing activity and house prices, in my view, have so far not derailed the prospect that economic growth will return toward trend at the end of 2007 and in 2008," said Philadelphia Federal Reserve Bank President Charles Plosser.

On Wednesday, a senior U.S. Treasury official said the recent turmoil in the subprime market does not threaten the wider economy.

"The market is adjusting and seems to be settling at new prices. ... It does not seem to be a systemic issue," said Robert Steel, the Treasury's undersecretary for domestic finance.

SALES SEEN SLUMPING

Sales of existing homes are seen at 6.11 million units this year, down from the 6.18 million units the industry group predicted last month.

Sales in 2007 will be the lowest since 2002 when 5.63 million existing homes were sold. However, even with the decline, this year would rank as the fifth highest on record, the real estate group said.

The national median sales price for existing homes should ease by 1.4 percent to $218,800 this year. Last month the trade group said prices should slip 1.3 percent.

Today's housing market favors home buyers with a large inventory and soft prices, said Lawrence Yun, the trade group's senior economist.

"Buyers now have an overwhelming advantage given the wide selection of homes available in many markets," he said.