Real-estate update

NEW YORK (CNNMoney.com) -- The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began keeping track nearly 40 years ago.

In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less.

The subprime mortgage mess led the group to cut its sales forecast as well. It said problems some buyers may have getting financing reduced its forecast for sales of existing homes this year by 100,000 homes to 6.34 million. That sales pace would be 2 percent below the 6.48 million sold in 2006.

The subprime mortgage sector, which handles loans to people with less than top credit, has seen a number of top lenders stop making loans, while others have gone bankrupt in recent months as delinquencies and mortgage default rates rise. That has led remaining lenders to tighten underwriting standards and raise rates for those borrowers.

The real-estate market is massive, and so the shifts are generally pretty subtle. What I think is going to happen is a drop in housing prices over the next few years. The price drop will be more noticable in areas that have seen the highest increases over the last decade.. i.e., coastal areas, but it's not going to be to the degree where a person will save much by waiting for it to happen.

Housing sales will slip a bit also as there will be fewer buyers.. and the foreclosures will continue until the sub-prime loans dry up. That, of course, assumes that there is going to be some government regulation.

Is there money to be made by selling somebody a bad loan where the lender knows that the borrower will probably default? It seems to me there is.. and as long as there is, there's always going to be people getting in over their heads who end up getting foreclosed on.