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How long will housing slump last?

The slump, which has seen the median price of a home drop 1.7 percent, could last in into the summer of 2007, experts say.

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She points to a rising supply of homes on the market. There are now enough homes on the market to meet demand for 7.5 months, up from 7.3 months supply in July, Dr. Bangalore says. The last time inventories surpassed current levels was in October 1992, during the last housing downturn.

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Economist Richard DeKaser of First National City Corp. in Cleveland says the decline in sales volume is only about half-way done. So far, he reasons, existing-home sales have fallen about 12.6 percent on a year-over-year basis. "On average, they have fallen on the order of 25 percent," he says. "This suggests we're about halfway there, and by late next year, this should be over."

Though the housing numbers are bad, the rate of decline may be slowing. "The fact is that the decline is showing signs of losing momentum, not gaining momentum," says Bob Brusca of FAO Economics in New York. For example, the decline in the August sales volume was less than economists had been expecting, he says. "We can't say it's a turning point, but we can say it's an inflection point."

He expects the downturn to continue for another year, but at a slower pace. And he's not concerned about the drop in home prices, because during the past three years, the median price of houses is up 27 percent, and the average price of a home is up 20.9 percent.

"Even though prices have fallen, people still have a lot of wealth and equity built up," Mr. Brusca says. "We would need to see a lot more decline before it materially impacts consumer finances."

One new uncertainty in this cycle is today's greater reliance on adjustable-rate mortgages. With the interest rates on those loans shifting upward, a key question is how many owners will have to unload homes they bought during good times when values were rising and interest rates were low.

"The probability of a more disorderly correction is raised by this element," says Bangalore of Northern Trust.

The decline in last month's prices of new homes on a seasonally adjusted, year-over-year basis is the first such drop since February 1993, except for a very slight blip on a seasonally unadjusted basis in April 1995.

Prices may continue to fall, since many of the leading economic indicators have continued to weaken.

The home builders' sentiment index is continuing to decline, as are the number of pending sales of existing homes. Applications for mortgages also remain soft. And the inventory of unsold homes continues to rise, now up to 3.9 million homes, about double what it was in 2003 during the height of the housing boom.

"The rising number of unsold homes reflects the home sellers who were hoping to cash out at a high price and have kept their homes on the market for an extended time," says Mr. Zandi.

Some of these trends are likely to continue, until next summer, says Zandi, when he expects to see housing start to stabilize. With such a long period of weakness, he says, it's beginning to look as if home prices might fall in 2007 by about 5 percent on a year-over-year basis. "This would be the first calendar-year decline since the Great Depression," he adds.