Real Estate

Real estate: More price drops, more layoffs

No light at the end of the tunnel in latest forecast from the Mortgage Bankers Association.

By Jeanne Sahadi, CNNMoney.com senior writer

BOSTON (CNNMoney.com) -- For those in the real estate industry and for those looking to buy or sell a home, it could take until 2009 to catch a break.

That's the forecast from Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), who will present his outlook to an auditorium full of real estate professionals on Wednesday morning.

Duncan expects national median home prices to fall between 2 percent and 4 percent both this year and next. Prices will be held back by an oversupply of homes for sale, an increase in foreclosures and continued uncertainty among mortgage investors,

Duncan said that some markets will hold their own, but he singled out seven likely to be hit the hardest. They are: California, Texas, Arizona and Nevada, which drew a lot of investor speculation during the housing boom; and Ohio, Michigan and Illinois, where the economies have been hit hard by job loss.

For this year, Duncan is predicting a 22 percent drop in new home sales and a 12 percent drop in existing home sales, followed by a 10 percent drop in each next year. As home sales fall, Duncan also expects a drop of 15 percent in mortgage loan originations to $1.18 trillion this year, plus another 18 percent drop in 2008 to $1 trillion.

Come 2009, Duncan expects original loan volume to increase 5 percent.

"But given the oversupply of homes in a number of markets any significant increase in homebuilding is probably years off," Duncan said in a statement.

The continued weakness will push those in the mortgage industry to further cut their workforce. On top of the 60,000 to 70,000 mortgage-related layoffs that have already occurred, Duncan expects to see another 30,000 to 40,000 by early 2008.

What? No good news?

There's one group of home buyers, home sellers and loan originators who will have an easier time of it than everyone else: those dealing with "anything that's conventional and conforming," Duncan said. In other words, 30-year fixed rate mortgages for borrowers with good credit under the "jumbo" cutoff of $417,000.

His forecast for long-term mortgage rates: an increase from 6.4 percent currently to 6.6 percent by early 2008. Top of page



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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.