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U.S. Home Prices Expected To Slide Another 8%

Monday, November 1, 2010 - 7:34 AM
U.S. home prices expected to slide another 8% - Yahoo! Finance=

1st quote touches on the concerns, second quote notes some potential positive views:

 
Fiserv, a market analytics company, has scaled back its home price projections considerably. In February, it forecast national price gains of about 4% through the end of 2011. The company's latest prediction is for a 7.1% drop in prices between June 30, 2010 and June 30, 2011.

In fact, after five months of gains, prices in the 20 largest metro areas fell 0.2% in August, according to the latest S&P/Case-Shiller report.

The good news is, "There'll be no vicious, self-reinforcing spiral down," according to Mark Zandi, chief economist with Moody's Analytics.

But, he added, "more home price declines are coming."

He's forecasting another 8% drop in home prices through the third quarter of 2011, which will put the total peak-to-trough decline at 34%.

Even after that, in 2012, he sees very little price growth.

 
However, Zandi sees a few factors that are positive.

These include: Low interest rates; FHA, Fannie Mae and Freddie Mac all lending to qualified buyers; and an improving job picture.

Zandi is especially confident that the employment picture is about to brighten. Corporate profits have spiked and, historically, hiring follow profits -- with a lag of eight to 10 months. That means companies should start hiring workers very soon, Zandi said.

And once Americans start returning to work, they'll find home prices are very reasonable. Housing is the most affordable it's been since the pre-boom years. During the boom, Zandi said, prices were overvalued by about 50%; today it's close to zero.

That has attracted many investors, including foreign buyers. They've been scooping up single-family-homes and condos in hard-hit markets like Florida, the Southwest and the Midwest and renting them out.

"The reason they're in these markets is because they see value," said Zandi.

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