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Housing Forecast Hammers Homebuilders

The National Association of Realtors cuts its 2007 home-sales view and projects a drop in prices.
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Shares of homebuilders slid Wednesday after a prominent real estate trade group lowered its projection for 2007 housing sales and forecast a yearly decline in existing-home prices.

The National Association of Realtors said that it expects sales of existing homes to fall 2.2% to 6.34 million units in 2007 from 6.48 million in 2006. Previously, the group projected a 0.9% decline. The NAR predicts about 6.52 million unit sales in 2008.

The group expects new-home sales to total 904,000 units in 2007 and 935,000 in 2008, well below the 1.05 million homes sold last year.

The NAR said tighter lending standards and the fallout from the subprime loan fiasco will hurt sales. The group noted, however, that 2007 still stands to be the fourth-highest year on record for existing-home sales.

After the report, the

SPDR Homebuilders

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exchange-traded fund was sliding 49 cents, or 1.5%, to $32.37. Among individual stocks,


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was dropping 90 cents, or 2.1%, to $41.38, while


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sank 62 cents, or 2.4%, to $25.63.

D.R. Horton

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, which on Tuesday posted a

big drop in orders for its most recent quarter, was down 36 cents, or 1.7%, to $21.34.

The NAR said the national median existing-home price will probably slip 0.7% to $220,300 in 2007, following a 1% rise last year. That would mark the first annual decline in prices since the group began tracking the figure nearly 40 years ago. The median new-home price is projected to increase 0.4% to $246,200 this year, after gaining 1.8% in 2006.

"When you look at housing activity in 2007, especially during the first half of this year, the percentage change in median home price is being distorted as the composition of sales shifts geographically from high-cost markets to moderately priced areas, in contrast with the sales distribution a year earlier," said NAR Chief Economist David Lereah in a statement. "Within given markets, most areas can expect minor price gains."