2008 is being predicted to bring 11-year low phase for the housing market in the US with a decline in sales of previously owned homes as well as new homes.

The Mortgage Bankers Association, the industry’s largest trade group, predicted a record low in 2008 for existing home sales in the US with mortgages getting increasingly out of buyers’ reach, reported Latimes.

There is a likelihood of a fall in sales of previously-owned homes to an 11-year low from 5.68 Million in 2007 to 4.94 Million in 2008 before a reversal to 5.12 Million in 2009. A drop is also expected in new home sales by 15% in 2008 to 666,000 followed by a 6.6% surge in 2009, owing to reduction of mortgage rates by banks in 2009 (result in partial boost in 2009).

The third consecutive year of the US housing slump since 2006 will mean more stringent lending and greater difficulty for real estate purchase in 2008. Due to a credit crisis resulting from sub-prime mortgage losses, the capital of mortgage lenders has been compromised affecting the availability of new loans.

There appears to be no relief in short-term for the national housing slump with the loss of homes of hundreds of thousands of families to foreclosure in 2007 following their inability to continue mortgage payments, a major portion being subprime loans. Such incidents will also keep buyers from making new home purchases in 2008.

Banks are also nearing capital limits by writing down the value of assets while putting loans on balance sheets due to the virtual closure of markets for securitized products. As mortgage defaults increase, the inventory of unsold home is rising, thereby intensifying the fall in housing demand.

Consumer spending is also being adversely affected by additional factors including a major slowdown in employment growth, spiraling prices of gasoline and food, and plunging home prices, taking a toll on financial transactions in the US housing market.

As per a Research Analyst at RNCOS, “The US housing market is in a crisis due to unstable loan and mortgage policies by financers and banks. Certain policy changes are recommended like hiking the loan limit on conventional mortgages for the requisite push for home sales, higher liquidity, stronger home prices and fewer foreclosures, without delay as massive loss is already afflicting the industry.”