UNITED States new-home sales will fall 12 percent next year as housing starts drop by a record amount, according to Mortgage Bankers Association chief economist Jay Brinkmann.
"We expect residential investment to decline further through the first half of 2009, due to the excess supply of houses and weakened demand from the recession," Brinkmann said on Tuesday at the group's annual meeting in San Francisco. The MBA also predicts that the US economy will contract in the first half of 2009.
US housing starts will drop to 525,000 in the second quarter of 2009, a record 70-percent decline from the peak in the third quarter of 2005, according to the forecast. Mortgage originations for home purchases will fall 20 percent this year to US$912 billion, Brinkmann said.
National average home prices will fall through most of 2009, driven by declines in California and Florida, and unemployment will likely accelerate to 7.8 percent by the first part of 2010, Brinkmann said. Sales will increase 25 percent in 2010, reducing the glut of new houses, and mortgage originations for purchase will increase by about 2 percent.
California, Florida, Nevada and Arizona accounted for 46 percent of US homes entering foreclosure at the end of the second quarter and had a combined 87 percent increase in foreclosures from the previous quarter, Brinkmann said in an interview with Bloomberg News.
Those states also had the highest US foreclosure rates in August, RealtyTrac Inc, a California-based seller of default data, reported last month. Nevada led with one foreclosure filing for every 91 households, followed by California, Arizona and Florida.
Home prices in 20 US cities fell in July at the fastest pace on record, according to the S&P/Case-Shiller home-price index, as foreclosures and contracting consumer spending signaled that the worst housing recession since the 1930s had yet hit bottom.