A trade group for home builders said Thursday that home-price declines won’t stop until early 2009, as a lethargic economy and troubled mortgage market drop the bottom even lower.
David Seiders, chief economist for the National Association of Home Builders, said he agrees with what he called an emerging consensus about the housing market: that median U.S. housing prices will drop by 10 to 15 percent from a peak in 2005 to its eventual bottom.
“We’re coming off what had really been an over-exuberant housing boom,” Seiders said in a conference call with reporters.
Seiders projects construction of new houses and apartments will plunge to 1.08 million units next year, down from a forecast of 1.35 million for 2007. He expects housing starts to rebound to 1.19 million in 2009.
However, while prices are likely to be low next year, the trade group projects sales are will to bounce bank next spring, as many buyers have been holding off to see what direction the housing and mortgage markets head.
“We are now approaching the bottom for home-sales activity,” Seiders said, noting that this year’s turmoil in the mortgage market severely weakened demand for new housing this year — much more than initially expected.
While one-time boom markets such as Florida, California and Nevada will be slow to right themselves, areas of the country that didn’t see a surge in prices are holding up , said Jerry Howard, the trade group’s chief executive.
“The markets that were not overheated are still performing admirably,” Howard said.
Nationwide, new-home sales are projected to fall to 793,000 this year, down 25 percent from 1.05 million last year, the builders trade group said. Sales are expected to drop further to 741,000 in 2008 before climbing back to 838,000 in 2009.
Earlier this week, the trade group said its housing market index, which gauges builders’ perceptions of conditions and expectations for home sales over the next six months, came in at 19 in December — the lowest level since the index began in January 1985. The index hasn’t moved since October.
Tighter lending standards, rising defaults among borrowers with weak credit and an overall uneasiness about the housing market’s future have meant fewer customers for hard-hit homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.
The Commerce Department reported Thursday that gross domestic product grew at a 4.9 percent pace in the July-to-September quarter, unchanged from an estimate made a month ago.
The performance was especially impressive given that the housing market plunged deeper into despair. Builders slashed spending on housing projects in the third quarter at an annualized rate of 20.5 percent, the most in 16 years.
Credit problems have made it harder for people to get financing, aggravating the housing slump. The inventory of unsold homes continues to pile up, forcing builders to severely cut back construction projects.