As HousingWire reported over the weekend, private mortgage insurance firm PMI Mortgage Insurance Co., of PMI Group (PMI), does not expect an additional downturn in the US economy in the New Year, and even projects a "moderate" pace of growth in 2010. "If this is correct, and we think it is, then the recession has ended and the unprecedented amount of liquidity that the Federal Reserve has added to the economy in order to spur an expansion won't be needed," PMI said in a market outlook report (available to download here). PMI economists added: "If fact, the longer the Fed keeps the surge in liquidity in place in the face of an expanding economy, the greater the chance that rising inflation and asset bubbles will result." PMI expects the Fed to remove its liquidity through allowing special facilities to run down and raising the federal funds rate. Despite the Fed's exit from liquidity efforts, the housing market looks poised to post some moderate recovery in the new year after finishing 2009 on mixed results. PMI projects existing home sales to rise 3.7% at the end of 2009. New home sales should decline 19.4% for the year, economists said, as buyer demand continues to work through substantial foreclosure inventory. An oversupply of homes also continues to weigh on prices, bringing the median existing home price down by 12.6% in 2009. But next year may see some positive growth, PMI said. Continued high affordability will spur increases in home sales over the course of 2010, despite a slow-down after the expiration of the expanded first time homebuyer tax credit in April. Sales should rise more strongly in 2010 as the job market improves. PMI expects existing home sales to climb by 8.8% and new home sales by 29.2%. Write to Diana Golobay.