Dec. 28 (Bloomberg) -- Sales of new homes in the U.S. fell in November, approaching an 11-year low and signaling no end to the housing recession that's threatening to stall growth in 2008, economists said before a report today.

Purchases fell to an annual pace of 717,000, according to the median forecast in a Bloomberg News survey of 68 economists, from 728,000 in October. The 716,000 pace reached in September was the lowest since 1996.

The residential real-estate slump, already the deepest in 16 years, shows no sign of ending as discounts fail to lure buyers and mounting foreclosures swell the glut of unsold properties. Falling property values may cause consumer spending to cool, boosting the odds the expansion will come to an end.

``The housing recession continues to grind away,'' said Brian Bethune, U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``Imbalances in the housing market overall are being exacerbated by a rising number of homes being reverted to the market due to foreclosures.''

Economists' forecasts ranged from 685,000 to 750,000. The Commerce Department report is due at 10 a.m. in Washington.

The housing recession has deepened since the August turmoil in subprime mortgages led to a worldwide credit shortage. Stricter borrowing standards and a freeze on lending to borrowers with poor credit put mortgages out of reach for more potential buyers. That's driving home prices lower, weakening sales as people hold out for even bigger reductions.

2008 Forecast

Sales of new houses will probably tumble 8.9 percent in 2008 after a 25 percent drop this year, according to a Dec. 13 forecast from Fannie Mae, the largest mortgage buyer. Sales of new homes in October were already down 48 percent from their July 2005 peak.

Home prices in 20 metropolitan areas fell 6.1 percent in the 12 months to October, the most in at least six years, according to a report this week by S&P/Case-Shiller. The decline raises the risk that more Americans will walk away from properties that are worth less than they owe, economists said.

Lehman Brothers Holdings Inc. is forecasting prices will fall at least 15 percent from peak to trough. By that measure, the S&P/Case-Shiller index is down 6.6 percent so far.

With sales and prices falling, foreclosures rose 68 percent in November from a year earlier. They may continue surging in 2008 as mortgages for some subprime borrowers with adjustable rates reset.

Less Construction

As foreclosures throw more homes onto the market, homebuilders such as Hovnanian Enterprises Inc., New Jersey's largest, are scaling back.

Hovnanian plans to ``pare down our inventories in virtually all our markets,'' Chief Executive Officer Ara Hovnanian said on a conference call Dec. 19. ``It will be a difficult year.''

Housing starts are near a 14-year low and have fallen 48 percent since their January 2006 peak. Declining home construction has subtracted from economic growth for the last seven quarters, and economists are expecting the drag to continue in 2008.

The slump in home construction is rippling across the economy, reducing demand for building materials, appliances and furniture, while weakening job growth as builders, mortgage companies and manufacturers reduce staff.

The weaker housing market is also forecast to undermine consumer spending, which makes up two thirds of the economy, as falling property values leave owners feeling less wealthy and with less equity to tap for extra cash.

Recession Odds

The odds of recession have increased since the credit markets froze as a result of the subprime crisis. The economy will expand at a 1 percent annual pace in the fourth quarter after growing at a 4.9 percent rate from July through September, according to the median forecast of economists surveyed this month by Bloomberg News.

`The probability of recession is 50 percent for next year at some point,'' Martin Feldstein, head of the National Bureau of Economic Research, which determines when contractions start and end, said in a Dec. 14 interview. ``We could see a downturn starting sometime in the spring or the second quarter of next year.''

                        Bloomberg Survey

================================================================
                           Chicago New Home New Home
                                PM    Sales    Sales
                             Index   ,000's     MOM%
================================================================

Date of Release              12/28    12/28    12/28
Observation Period            Dec.     Nov.     Nov.
----------------------------------------------------------------
Median                        51.7      717    -1.6%
Average                       51.7      715    -1.7%
High Forecast                 55.4      750     3.0%
Low Forecast                  49.2      685    -5.9%
Number of Participants          44       68       68
Previous                      52.9      728     1.7%
----------------------------------------------------------------
4CAST Ltd.                    50.0      715    -1.8%
Action Economics              55.0      725    -0.4%
AIG Investments               ---       728     0.0%
Aletti Gestielle SGR          52.5      718    -1.4%
Analytical Synthesis          ---       690    -5.2%
Argus Research Corp.          53.0      730     0.3%
Banc of America Securitie     51.0      720    -1.1%
Bank of Tokyo- Mitsubishi     55.4      724    -0.5%
Bantleon Bank AG              51.5      710    -2.5%
Barclays Capital              52.0      720    -1.1%
BBVA                          ---       725    -0.4%
Bear, Stearns & Co.           51.0      720    -1.1%
BMO Capital Markets           52.0      720    -1.1%
BNP Paribas                   51.5      700    -3.8%
Briefing.com                  52.5      700    -3.8%
Calyon                        51.5      715    -1.8%
CIBC World Markets            50.0      700    -3.8%
Citi                          51.0      715    -1.8%
ClearView Economics           ---       730     0.3%
Commerzbank AG                50.0      714    -1.9%
Credit Suisse                 51.0      700    -3.8%
Daiwa Securities America      ---       700    -3.8%
Danske Bank                   52.0      725    -0.4%
Desjardins Group              51.0      715    -1.8%
Deutsche Bank Securities      52.0      720    -1.1%
Dresdner Kleinwort            52.0      713    -2.1%
First Trust Advisors          51.4      730     0.3%
Fortis                        52.5      700    -3.8%
FTN Financial                 51.0      700    -3.8%
Global Insight Inc.           ---       720    -1.1%
Goldman, Sachs & Co.          ---       728     0.0%
H&R Block Financial Advis     ---       725    -0.4%
Helaba                        50.5      721    -1.0%
Horizon Investments           53.0      710    -2.5%
HSBC Markets                  ---       740     1.6%
IDEAglobal                    50.4      714    -1.9%
ING Financial Markets         51.0      700    -3.8%
Insight Economics             52.0      710    -2.5%
Intesa-SanPaulo               52.0      733     0.7%
J.P. Morgan Chase             51.0      728     0.0%
Janney Montgomery Scott L     ---       705    -3.2%
JPMorgan Private Client       51.8      723    -0.7%
Landesbank Berlin             50.0      750     3.0%
Lehman Brothers               ---       720    -1.1%
Maria Fiorini Ramirez Inc     ---       710    -2.5%
Merrill Lynch                 52.0      692    -4.9%
Moody's Economy.com           51.0      730     0.3%
Morgan Keegan & Co.           ---       711    -2.3%
Morgan Stanley & Co.          ---       720    -1.1%
National Bank Financial       ---       710    -2.5%
National City Bank            51.4      700    -3.8%
Natixis                       ---       710    -2.5%
Nomura Securities Intl.       49.2      685    -5.9%
PNC Bank                      ---       690    -5.2%
RBS Greenwich Capital         ---       710    -2.5%
Ried, Thunberg & Co.          52.5      725    -0.4%
Scotia Capital                ---       720    -1.1%
Societe Generale              ---       712    -2.2%
Standard Chartered            ---       720    -1.1%
Stone & McCarthy Research     53.2      720    -1.1%
Thomson Financial/IFR         53.5      730     0.3%
UBS Securities LLC            50.0      700    -3.8%
Unicredit MIB                 ---       710    -2.5%
University of Maryland        52.0      723    -0.7%
Wachovia Corp.                ---       715    -1.8%
WestLB AG                     51.8      720    -1.1%
Westpac Banking Co.           ---       713    -2.1%
Wrightson Associates          53.0      725    -0.4%
================================================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: December 28, 2007 00:12 EST