Economists forecast a 3.5% rise in home-price index this year; 0.4% next year

25 of the 48 economists who answered the survey's question about housing predicted no change or a decline in a closely watched gauge of nationwide home prices during 2007, in the latest WSJ.com survey. The average prediction for next year was for an increase of 0.43%, lifted by five economists who forecast gains of 5% or more.

The Office of Federal Housing Enterprise Oversight's home price index, upon which the economists based their predictions, has never posted an annual decline since its first calculation, in 1975. The last time that the index trailed inflation was in 1996, when home prices rose 2.6% compared to a 2.9% inflation rate.

According to the National Association of Realtors monthly economic outlook, the median existing-home sales prices should rise about 2.8% this year and 2.2% next year. Median new-home prices are expected to rise 0.2% in 2006 and 2.4% in 2007. Existing-home prices have risen at an average of 9.6% annually in the past four years, well ahead of the inflation rate. New-home prices rose 13.3% in 2004 and 9% in 2005.

From 1968 through 2000, median sales prices rose about 6.2% annually, while the consumer price index rose at a 5.1% annual rate. Consumer prices excluding shelter costs have risen 4.4% in the past year.

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