Another housing prognosticator has weighed in with a prediction that the downturn is in the, uh, well, the home stretch.

This time, it's David Berson, chief economist at Fannie Mae, who told reporters last week that the "biggest declines are behind us."

"There are still some (declines) to go," he said at a National Press Club briefing, where he presented Fannie May's 2007 outlook for the economy and mortgage market. "But the worst is over."

Although key housing market benchmarks have stabilized in recent months in response to lower mortgage rates and warmer-than-normal temperatures, Berson expects sales to fall further in 2007. He is predicting a 7-8 percent drop in sales, which he said "is more than just a little bit, but not as much as last year."

Fannie Mae expects that when all the numbers are in, new homes sales will be down 17.2 percent for 2006 and existing homes will slip by 8 percent, to 1.06 million and 6.51 million, respectively. For 2007, new home sales will dip 7.1, to 999,000, while existing home transactions will fall another 8 percent, to 5.98 million.

If Berson's projections are on target, sales this year will be at their lowest level since 2002, while the two-year decline would be the largest since the 1989-'91 downturn. And as have others, the Fannie Mae economist attributes the slide largely to declines in investor activity.

"You can't argue with their choice of investments. After all, housing prices recorded double digit gains in 2004 and 2005," he told reporters. "And now it makes sense for them to invest their money elsewhere."

Berson said that by mid-year, "most of the decline in investment activity should be behind us."

By then, prices should begin to turn around, he also said. But for the year as a whole, prices will be down 1-2 percent on a national basis, he added.

"National home price appreciation is likely to modestly negative in 2007," he said. But since all real estate is local, some markets will feel the pain much greater than others.

If the average price of houses as measured by the Office of Federal Housing Enterprise Oversight's repeat transaction index shows a lower figure for this year than last, it will be the first-time ever that the national average will have gone down, Berson pointed out. "It's never fallen; this will be the first time in its history."

Asked which markets will be in for the toughest sledding, the economist said those which showed the sharpest gains will also show the sharpest losses. But the declines won't be as great as the increases, he ventured, "so prices on average will continue to go up."

Overall, though, Berson predicted that 2007 "will be a strong year for housing, but far from a record year." And the next several years will see "slower, more sustainable growth." Because of the drop in sales and "sharp slowdown" in price gains, the Fannie Mae soothsayer is calling for an 11.2 percent decline in purchase money originations -- on top of the estimated 3.1 percent drop in 2006. Refinancings, on the other hand, will be little changed, as borrowers continue to turn in their adjustable mortgages for the fixed-rate variety at a stepped up pace.

The sum of the two -- purchase and refi -- will equal $2.33 trillion in loan volume vs. $2.5 trillion in '06, Berson said.

As for loan prices, Fannie Mae is expecting long-term rates to hold relatively stable much of the year until the Federal Reserve Board begins to ease back on the economic hatches.

Published: January 24, 2007

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.