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

By Jeanne Sahadi

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

Source CNNMoney.com

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