How long will housing slump last?

First came a slowdown in the volume of home sales. Now prices are falling, and the question for anyone selling, buying, or even just hanging onto a home is: How far and how fast?

The expert consensus: The slump could last into the summer of 2007. And the speed could depend on how many people hit the panic button or take their homes off the market.

Last month, the median price of a single-family home was down from a year ago – the first significant national decline in 13 years, according to tracking of previously owned homes by the National Association of Realtors. This August, the median price for all housing types was $225,000, down 1.7 percent from August 2005, when the median was $229,000, the realtors' group reported Monday.

Historically, it's rare for prices to sink very far nationally even when recessions occur. The National Association of Realtors (NAR) predicts a return to stability next year. But some economists are forecasting a tougher climate, thanks to an extraordinarily large run-up in prices in the past couple of years and homebuyers' increasing reliance on exotic new types of mortgage loans. Merrill Lynch predicts a 5 percent home-price drop in 2007, while Goldman Sachs, another New York investment firm, forecasts a 3 percent decline nationwide.

"The housing market is weak and getting weaker," says Mark Zandi, chief economist for Moody's Economy.com. "It appears the downturn has a ways to go."

After a five-year boom in the housing market, where home prices head from here could have a significant impact on the direction of the economy and on the pocketbook finances of millions of families. But economists differ in their forecasts of how the current real estate cycle will unfold.

NAR has taken a largely upbeat view. "This is the price correction we've been expecting – with sales stabilizing, we should go back to positive price growth early next year," NAR economist David Lereah said in a statement accompanying Monday's numbers.

The volume of sales barely budged in August, closing the month at an annualized pace of 6.3 million existing-home sales, the report said. That suggests some possible stabilizing after months of declines in the number of units sold. Home sellers may finally be settling for lower prices rather than letting their homes sit on the market.

Pessimists say a speculative "bubble" had built up and now needs to unwind – possibly over several years.

"As draconian as that sounds, a 5 percent price decline would only reverse one-tenth of the price run-up over the previous five years," Merrill Lynch economist David Rosenberg wrote in a recent report.

"Additional price declines should not be surprising," says Asha Bangalore, an economist at Northern Trust Co. in Chicago. "We have a recession in the housing market.... Usually it takes two to three years to stabilize."

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