Realtors Predict Florida House Price, Sales Drop

The National Association of Realtors, which has long proclaimed that national and Florida home prices haven’t declined since the Great Depression, now says they are likely to do just that this year.

Among other lower expectations and/or findings set forth by the group are:

• Realtors expect the first nationwide drop in home prices this year since the Great Depression.

• Lenders’ tighter credit in the wake of the bad credit Florida mortgage crisis is making it harder for some people to buy homes.

• Rising foreclosures will add to supply in some glutted markets.

• Realtors are seeking more lenient terms for borrowers to qualify for Federal Housing Administration-backed loans.

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 Florida mortgage lenders.

Before the subprime mortgage problems blew up recently, said Lawrence Yun, an economist for the Realtors, the group expected the Florida housing market to begin recovering by the middle of this year. Now, he says, recovery is unlikely before late this year.

In 2006, the median price rose 1.1% from a year earlier to $222,000, even though the monthly median prices reported in the second half of 2006 were down modestly from year-earlier months.

David Lereah, the Realtors’ chief economist, says he revised downward the 2007 forecast because of tighter lending standards that have taken effect over the past few months in the wake a steep rise in defaults on subprime mortgage loans, which are loans made to people with weak credit records or high debt in relation to income. The more cautious stance of lenders will mean some people who want to buy homes will find it impossible to receive Florida home loans on reasonable terms.

At the same time, a rise in foreclosures will add supply to housing markets that are already glutted in much of the country.

Thomas Lawler, a housing economist in Vienna, Va., expects an even steeper fall, of 4.3%, in the median price of houses this year.

The Realtors also cut their forecast of sales of previously occupied homes in 2007 to 6.34 million from the 6.42 million projected a month earlier and 6.44 million two months before. In 2006, home sales totaled 6.48 million.

Meanwhile, the Mortgage Bankers Association suggested that the media’s intense focus on the housing crunch, and shoot-from-the-hip responses from legislators and regulators, threatened to make the situation worse. In an email Tuesday, the association told its members that it has allocated an extra $5 million to combat “a torrent of unfair press and counterproductive policy responses” sparked by the turmoil in the subprime lending market, where dozens of lenders have been forced to close down or seek bankruptcy protection.

“Misleading information, often reinforced by vivid and frightening anecdotes, is raising the very real possibility of overzealous regulatory and legislative responses,” the association wrote.