The chief economists of the National Association of Realtors® (NAR) on Thursday predicted that sales of existing homes will probably remain flat through late spring and then begin a gradual recovery during the second half of 2008.

Lawrence Yun made the forecast based on the release of NAR's Pending Home Sales Index (PHSI) for January. This index, based on home sale contracts signed during the month, is a forward looking indicator for the sales of existing houses over the following several months. The PHSI for January was unchanged from December levels at 85.9 but was 19.6 percent below the January 2007 reading of 106.8.

"This additional sign of a stabilizing market is encouraging, and our members are telling us there's been a pickup in shopping activity." Yun said. "Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers."

Yun said that many buyers have been sitting back anticipating higher loan limits for both FHA and conventional loans. These, he said, "will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions. Therefore a notable rise in home sales can be anticipated in the second half of the year.

Existing-home sales are expected to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. Total sales for 2008 are projected at 5.38 million, but are then seen to rise to 5.60 million in 2009. The existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase to $223,800 in 2009.

New-home sales will probably decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. There is a longer wait for recovery for new construction, however. Housing starts, including multifamily units, are expected to fall 25.1 percent to 1.01 million this year and another 2.7 percent to 987,000 in 2009.

"As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half," Yun said. "That will permit a quicker return to balanced market conditions in many local areas." The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.