Falling Home Prices Seem to be the New Consensusby Tim Manni
But I thought the housing market was improving? If you were under the assumption that housing had hit bottom, chances are you’re not alone.
The ever-changing monthly numbers and future projections have created a lot of back and forth expectations from consumers over the state of the housing market. The problem has been that the numbers themselves have flip-flopped from month to month. One month they look good, the next they look bad.
Falling Home Prices
On Monday, the PMI Group — a mortgage insurance firm — released a report that foretells that home prices were going to fall another 12% this year alone. PMI’s report represented a conflicting forecast (thus creating a conflicting expectation) after a summer that was full of positive housing news.
Existing and pending home sales, home prices, and foreclosures had all either improved or stabilized in June, July, and August. Sentiment was high coming into the fall.
However, more reports and forecasts have been released that agree with PMI’s dismal outlook. Fiserv — a financial information and analysis firm — also predicted that home prices would fall by about 12%. Well-respected analyst Mark Zandi from Moody’s Economy.com agrees that home prices will continue to drop and that the nation’s foreclosure crisis is far from over:
Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm.
“I think more price declines are coming because the foreclosure crisis is not over,” [Zandi] said.
When It Rains It Pours
A wide range of analysts are expecting the steepest home-price declines to occur in the areas of the country where foreclosures were most rampant:
Despite some tentative signs of recovery, the U.S. housing market remains vulnerable to further price drops—especially in areas where large numbers of mortgages are headed toward foreclosure over the next few years.
The Wall Street Journal’s quarterly survey of housing-market data in 28 major metro areas shows sharp drops in the number of homes listed for sale across the country. But the potential supply of homes is far larger because banks are likely to acquire significant numbers of foreclosed homes in some areas, notably Las Vegas, Atlanta, Detroit, Phoenix, Miami and other parts of Florida, and Sacramento, Calif., over the next few years.
The sheer time line of the foreclosure process alone (approaching two years in some states) suggests that we will be dealing with this problem for years to come.
Just as winning can erase the bad memories of a sports fans, players, and coaches (we have playoff baseball on the brain), rising home prices will help to erase some of the foreclosure fears, and will help bring the confidence back to the housing market which it so desperately needs. Unfortunately, predicting when that will happen is easier said than done.