According to this CNN story that ran earlier today, The National Association of Realtors now expects the national median home price to drop by 0.7% in 2007. If this materializes, it will be the first time that the group has recorded a nationwide decline since it first started keeping records 40 years ago. Last month the group forecast a 1.2% increase in the price of homes this year.
I have a few of comments on this story:
First, remember that these numbers are coming from the National Association of Realtors - a group whose primary reason for existence is to talk up the prices of real-estate. If they are forecasting a decline, I think it is probably safe to assume the numbers will be even lower.
Second, note that the numbers are getting worse. Just last month the same group forecast a modest increase in home prices in 2007. The trend is clearly down at this point. Talk of a bottom in the real estate market appears much too early, and I think that the market is likely to get worse before it gets any better.
Finally, while the forecast decline appears small, the number does not take inflation into account. This means that if the forecast materializes, the real decline is likely to be 3% to 3.5%. That is a substantial decline and I don't think that it will be the last one during this real estate downturn. Time will tell.