Home Prices

Analysts See 7% Drop in Home Prices over Next Year

Posted on Wednesday, November 17, 2010

Despite a bounce in home prices during the first half of 2010, Fiserv Inc. says it expects property values nationally to fall another 7.1 percent over the next 12 months before beginning to stabilize. The Wisconsin-based
financial services technology company sees double-dip territory ahead for many major markets, particularly those that saw the strongest appreciation during the spring and summer months of this year.
Prices of single-family homes rose an average of 3.6 percent during the second quarter of 2010 compared to a year earlier, according to the Fiserv Case-Shiller Indexes. As of the end of June, the median U.S. home price was $177,000, as tracked by Fiserv.
Fiserv says the annual increase in the national reading was driven by strong price increases in relatively high-priced markets, such as San Diego, Washington, D.C., and the San Francisco Bay area.
But despite the gain in the national average, prices actually fell in 70 percent of the 384 metro areas, compared to the 2009 second quarter. Many markets experienced double-digit drops, including Detroit; Boise, Idaho; Reno, Nevada, and many smaller markets in Florida and Oregon.
Fiserv notes that much of the sustained activity in the first half of the year was due to the federal government’s homebuyer tax credit that expired in June. Since then, home sales activity has plummeted.
In addition to the aftereffects of the tax credit, factors weighing on the housing market include chronic high unemployment and the large number of distressed
properties that remain in markets such as Florida, Arizona, and Nevada.
Taking these factors into consideration, Fiserv says it expects home prices will drop over the next four quarters in nearly all metro markets before they start to stabilize at the end of 2011, provided there are no downside surprises for the economy or the housing and mortgage markets.
“Some of the largest declines in prices will occur in markets that had strong spring and summer 2010 price increases,” said David Stiff, Fiserv’s chief economist. “This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels.”
Stiff points to the Phoenix market as a prime example. There, prices increased by 5.5 percent from the 2009 second quarter to the 2010 second quarter, but Fiserv is forecasting a 16 percent decline in Phoenix home prices by the second quarter of 2011.
Steep drops in home prices are expected to continue in markets that have been hurt most by the housing crisis.
From the second quarter of 2010 through the second quarter of 2011, Fiserv predicts home price declines of 12.4 percent in Nevada; 11.5 percent in Arizona; 9.4 percent in Florida; and 12.7 percent in the District of Columbia.
The analysts at Standard & Poor’s also released their forecast for the path of home prices on Monday. They anticipate an additional 7 percent to 10 percent drop through 2011.
“Low mortgage rates will likely continue to encourage refinancing, but their influence on homebuying activities has been limited due to the weak housing market and a lack of demand,” said Erkan Erturk, a credit analyst for S&P.
The ratings agency says a range of other key factors are also hampering a recovery in the housing market, including an elevated, but declining level of short sales and distressed asset sales.
S&P also points to the large backlog of distressed properties that have yet to be re-marketed for sale, high unemployment, and the ongoing foreclosure paperwork crisis as impeding any meaningful recovery for housing.
By: Carrie Bay DSNews.com

Supporting Materials


1000 characters maximum Your Name:    

By Category

Recommended Sites