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Existing-home forecast lowered

A real estate group predicted an 8.6 percent dip from last year, to the lowest level since 2002.

For-sale signs outside homes in Denver. The current credit crunch has been cited as a major reason for sliding sales.
For-sale signs outside homes in Denver. The current credit crunch has been cited as a major reason for sliding sales.Read moreDAVID ZALUBOWSKI / Associated Press

WASHINGTON - A trade group for real estate agents lowered its 2007 forecast for existing-home sales again yesterday for the seventh straight month, this time predicting a drop of 8.6 percent from last year.

The National Association of Realtors' revised monthly prediction called for U.S. existing-home sales of 5.9 million in 2007, compared with 6.5 million last year. Last month, the group had predicted a 6.8 percent drop.

The forecast comes as delinquencies among borrowers with weak, or subprime, credit have risen dramatically. Other loans are showing weakness as well.

"There's been an unusual hit to home sales, starting in March, when subprime problems emerged, and more recently when problems spread to jumbo loans," Lawrence Yun, an economist for the group, said in the forecast. Jumbo loans are those over the $417,000 limit guaranteed by Fannie Mae and Freddie Mac and are typically given to borrowers with good credit. Lenders have been charging higher rates for these loans because they are not backed by Fannie or Freddie.

New-home sales will not reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors had said the low point would be at the end of this year.

If the forecast is accurate, this year's sales would be the lowest since the 5.6 million in 2002.

The group also predicted that home prices this year would finish down 1.7 percent, at a nationwide median of $218,200.

Next year, the trade group expects existing-home sales to climb to 6.3 million.

The real estate trade group described a big cutback in the construction of new homes as a "healthy trend" that would reduce inventory. The group projected construction of new homes would fall to 1.4 million this year from 1.8 million last year.

Last week, the NAR said pending sales of existing homes had fallen in July to the lowest level in nearly six years as borrowers struggled to make final home purchases, particularly in expensive areas.