The National Association of Realtors released Tuesday a report last Tuesday that home prices and the volume of house sales will take a longer time to recover as what was previously predicted.

While the trade group sees growth in prices in 2008 from the current weak levels, its forecast is that the median existing home price will be $224,600 in the last quarter of 2008. The price forecasted would still be slightly lower than the record price reading of $225,000 in the third quarter of last year.

The trade group now says it expects a 3.7 percent decline in existing home prices in the third quarter of 2007 compared to last year, which is worse than the previous forecast of a 2.2 percent decline. And during the fourth quarter, we should see prices down by 1.3 percent from same period last year, rather than the 1 percent drop that was previously forecasted.

The outlook for the second half of 2007 which is weaker than expected should leave prices down by 1.7 percent for the entire year compared to its previous forecast of a 1.2 percent decrease. That would mark the first one full year of decline in home prices since the group started keeping track of median price data.

The group has continually been revising price estimates lower as problems in the mortgage markets made it more difficult for potential buyers to find financing and helped boost homes sales. As recently as the March economic forecast, it had still been looking for an annual gain of 1.2 percent in existing home prices.

In a statement by NAR senior economist, Lawrence Yun, "There's been an unusual hit to home sales, starting in March when subprime (mortgage) problems emerged, and more recently when problems spread to jumbo loans, with many potential buyers on the sidelines."

The group also sees continued weakening in new home prices, with values down 2.2 percent this year, and down 3 percent in the first quarter of 2008 compared to the first quarter of this year.

The median price of a new home is forecasted to bounce back in the second quarter of next year. On the other hand, that reading is expected to only reach $247,800 by the fourth quarter of next year, which would be down 3.1 percent from the peak of $255,900 seen in the first quarter of this year.

The weakening home prices are being fed by the slowdown in sales, which has resulted in a bigger house for sale inventory on the market. That slump in sales is now expected to be worse than the group's earlier estimates.

NAR is now looking a an 8.6 percentage decline in the pace of existing home sales this year, which is not only worse than its previous estimate of a 6.8 percent decline but also would top the 8.5 percent drop experienced in 2006. While the group believes existing home sales should rebound 5.8 percent in 2008 that would still leave the volume of sales below the record sales of 7.1 million seen in 2005. This is more than 11 percent below the record sales.

New home sales volume is expected to decline even more sharply, posting a 23.8 percent drop this year and another expected drop of 7.4 percent in 2008.