Home sales will decline by about 8% this year and housing starts will drop more than 10%, according to Diane Swonk, chief economist of Chicago-based Mesirow Financial.In the April issue of Themes on the Economy, Ms. Swonk also forecasts that home price appreciation will slow to 7% this year, down sharply from "the almost unbelievable and unsustainable" 12.8% pace of 2005. "Speculation played a much larger role than we would like [in 2005], with mortgages used for investment purposes rising to a record-breaking 12.1% of the market in the fourth quarter," Ms. Swonk said. "This leaves us worrying about the magnitude of a market correction, now that cancellations for new homes -- largely condos -- are on the rise and speculative investment appears to be cooling." Mesirow can be found on the Web at http://www.mesirowfinancial.com.

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