Realtors Predict First Drop in Home Prices in 40 Years

National Association of Realtors Predicts 0.7% Decline in 2007 -- the First Annual Drop on Record

For months the news in the housing market has been, at best, mixed. The good news is that mortgage rates are still historically low. According to Bankrate.com, the 30-year fixed-rate mortgage is currently at 5.79%.

At its worst, the news has been downright dreary. The subprime mortgage meltdown has panicked the mortgage industry, as well as realtors, members of Congress, and those in ancillary industries that build or sell home furnishings, appliances, etc. All have watched nervously as the rates of delinquency and mortgage defaults have spiked in recent months.

Now that weakness appears to be spreading into the wider housing market. New home sales have declined to the slowest pace in six years.

D.R. Horton, the nation's No. 2 home builder, reported that the number of new homes sold in its fiscal second quarter fell nearly 37 percent. The value of those homes fell about 40 percent to $2.6 billion for the period that ended March 31. The company blames the poor showing on a glut of homes for sale on the market.

The builder said the declines in sales volume and value were seen in all regions where it operates -- the Northeast, throughout the South, in California, and the rest of the West. Each region saw declines of about 20 percent or more. But California had the worst declines; volume was down 59 percent, and value of the homes sold fell 56.8 percent.

But some of the most troubling news of all came out just yesterday.

The National Association of Realtors (NAR) announced that it expects home prices to fall this year for the first time since they began keeping track nearly 40 years ago. In eight of the last nine months, median home prices have declined, while just over a year ago double-digit gains were the norm.

The NAR's latest monthly forecast predicted a 0.7 percent decline in the median price of an existing home sold this year. Just a month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less.