In surge of properties up for sale, GSE's economists forecast that home prices may fall an additional 1 to 1.5 per cent in the third quarter, and might later stabilize during the first half of 2011 and begin to rise during the balance of the year.

As a result of buyers moving forward their purchasing plans, the forecast could also be put at risk by a decline in the market beyond the anticipated drop in sales.

While we cannot rule out the risk that a more troublesome weakening of housing market fundamentals has recently started, home sales figures reported to date show no signs of a decline beyond that which one would expect given the pattern around the tax credit, the economists said. While the decline in sales to date appear smaller than what would likely occur in a 'double dip' housing and macroeconomic downturn, we remain vigilant for any further signs of weakening, they said in the September 2010 Economic Outlook.

The forecast home sales is expected to fall from an annualized rate of 5.22 million to 4.0 million in the third quarter and rise to 4.5 million in the fourth quarter, then continue to rise to 6.2 million by the end of next year.

Total conventional mortgages originated in 2010 will reach only $1,024 million this year after reaching $1,549 million last year, according to the Freddie forecast.