The National Association of Realtors, which has long proclaimed that U.S. home prices haven't declined on a nationwide basis since the Great Depression, now says they are likely to do just that this year.
The Realtors, which had been projecting as recently as February a 1.9% increase in the median home price this year, now say prices for previously occupied homes will slip 0.7% this year from the 2006 level.
The trade group's revised outlook, which puts it in line with a growing consensus that home prices will fall at least modestly this year, underlines how quickly expectations about the market have changed in light of a recent tightening of credit by mortgage lenders. Before the subprime mortgage problems blew up recently, said Lawrence Yun, an economist for the Realtors, the group expected the housing market to begin recovering by the middle of this year. Now, he says, recovery is unlikely before late this year.
It's important to remember several things about the housing market. First, this is a slow-moving market. There is a fairly large time lag between a seller putting the house on the market, the buyer signing a contract and closing the deal. That means it takes a bit more time for prices to actually respond to the market.
In addition, so far real estate prices have been fairly "sticky" -- not moving is response to the changing market fundamentals. Sellers just aren't willing to accept the reality that asking prices are simply too high given the decrease in demand.
Also note credit standards are tightening. That means demand will drop further by the end of the year.
The WSJ article had a nice graph as well: