Jan. 14 (Bloomberg) -- U.S. existing home sales will reach a bottom in 2008 as buyers find it tougher to get mortgages, according to a forecast by the Mortgage Bankers Association, the industry's largest trade group.

Sales of previously owned homes probably will drop to an 11- year low of 4.94 million from 5.68 million last year and then increase to 5.12 million in 2009, the Washington-based group said in today's report. New home sales likely will tumble 15 percent to 666,000 from 2007, before rising 6.6 percent in 2009.

Stricter lending standards are making it harder for people to buy real estate as the U.S. housing slump enters its third year. A ``credit crisis'' caused by subprime losses has depleted the capital of mortgage lenders and hobbled their ability to make new loans, said Doug Duncan, the group's chief economist.

``Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed,'' Duncan said in the report.

A surge in mortgage defaults is expanding the inventory of unsold homes and contributing to the decline in housing demand. The number of new foreclosures rose to a record in the third quarter and the number of Americans who fell behind on their mortgage payments rose to a 20-year high, MBA said last month.

Demand Weakened

``The demand for housing seems to have weakened further, in part reflecting ongoing problems in mortgage markets,'' Federal Reserve Chairman Ben S. Bernanke said in a Jan. 11 speech.

Mortgage originations for loans to buy homes will decline 18 percent to $955 billion in 2008, the MBA forecast said. That's almost half the $1.5 trillion lent in 2005 as the five- year real estate boom peaked. In 2009, purchase originations will rise 5 percent to $1 trillion, MBA said.

Loan refinancing will fall about 14 percent to $1 trillion this year from $1.17 trillion in 2007, the forecast said.

The average rate for a 30-year fixed mortgage probably will fall to 6.2 percent this year from 6.3 percent in 2007, MBA said. The average rate for an annually adjusting mortgage will be 5.5 percent, down from 5.6 percent last year, according to the forecast.

A year ago the bankers' group said 2007 would be the bottom of the housing slump, with 6.06 million sales. MBA updates its forecast monthly, based on the latest housing and economic data.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: January 14, 2008 16:49 EST