by Calculated Risk on 12/10/2007 01:46:00 PM

"Existing-home sales, after reaching the third highest total on record, 6.48 million in 2006, are forecast at 6.44 million in 2007 and 6.64 million next year."
National Association of Realtors, Feb 2007.

Just thought I'd start with a little comic relief from Those Wacky NAR Forecasts! Compare to the current NAR forecast:

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006.
NAR, Dec 2007

I think their forecasting model is broken.

Last December it was hard to find a Wall Street firm with a forecast under 6.0 million existing home sales in 2007. David Berson, then Chief Economist at Fannie Mae, forecast 2007 sales would be 5.925 million - and that was considered bearish. My forecast was for sales to "surprise to the downside, perhaps in the 5.6 to 5.8 million unit range."

Now we are starting to see forecasts for 2008. Back in August, Goldman Sachs forecast existing home sales would fall to 4.9 million in 2008. However, since then, Goldman has becoming even more bearish on housing.

Here is another forecast for 2008 via AP:

Patrick Newport, an economist at Global Insight, forecasts that home sales will drop from 5.66 million this year to 4.7 million in 2008

I'll put together a forecast at the end of the year, but this is why I posted the chart of sales as a percent of owner occupied units this morning (see 2nd chart). At the bottom of a housing cycle, sales typically fall to 5% or even 4% of owner occupied units (a measure of turnover). There are currently just over 75 million owner occupied units in the U.S., so 6% (the median for the last 40 years) would be sales of about 4.5 million in 2008, 5% would be sales of 3.75 million, and 4% would be 3.0 million units. This isn't a forecast - just a review of historical data - but it is possible that sales could fall sharply from the current levels.