Just when real estate investors and sellers are accepting the fact that the market is officially in a cooling phase, a new survey reports that a majority of investors believe the slowing market will continue into 2007.

            While this report does not specifically cite that a decrease in sales will continue. Home prices will not rise, leading to an overall low sales volume.

            Phil Izzo explains the worries and insights of investors in his September 7, 2006 article in The Wall Street Journal, “Housing Slowdown Takes Its Toll.”

            Twenty-five of the 48 economists who answered a survey (conducted at WSJ.com) question about the housing market predicted there to be no change or even a decline in average home prices during the 2007 fiscal year. Although the average overall prediction for next year was a home price increase of .43 percent, this figure was skewed by five of the economists who predicted gains of five percent or greater.

“The average forecast would leave home-price appreciation well below the expected rate of inflation. Just 27% of the respondents forecast an increase in home prices of greater than 2.7%, which was the economists' average expectation of the year-to-year increase in the Labor Department's consumer-price index for May 2007.”

The housing market appreciation or depreciation rates different in various regions across the U.S. but the overall consensus was next year’s prediction is a startling contrast from the previous few years.

“Moreover, broad-based declines in home prices are unusual. The Office of Federal Housing Enterprise Oversight's home price index, upon which the economists based their predictions, has never posted an annual decline since its first calculation, in 1975. The last time that the index trailed inflation was in 1996, when home prices rose 2.6% compared to a 2.9% inflation rate.”

The problem is not with today’s market or even the beginning of 2007; it goes beyond that. The market may continue to slide for several years, just like when it experienced the most recent “boom.”

“‘The housing correction is just in its early stages now,’ said Joseph Carson of AllianceBernstein, who forecast a 5% decline for 2007. ‘Existing home prices have come down to no-change on a year-to-year basis. For new homes, prices are below year-ago levels when you include added features. The prices will have to go lower to give demand a lift in short term.’”

Carson continued to explain that the market is not even close to where it will be when the correction is complete. Many amateur investors who got caught trying to flip multiple properties (buying and selling within a short period of time) are going to be most affected when they can’t sell their property until it is worth 20 to 30 percent less than the purchase price.

“Signs of cooling in the housing market have emerged in reports over recent months. Last week, David Lereah, chief economist of the National Association of Realtors, predicted that national median home prices will generally decline over the next few months. Although the group reported a slight increase in median home prices for July, it said that its index of pending home sales fell 7% in the month, the most recent figures available.”

            Not every regional market is doomed but the affects will undeniably be felt nationwide.