The following article was published 2/6/2009 in the Wall Street Journal.
By JAMES R. HAGERTY
House prices in much of the U.S. will bottom out in this year’s fourth quarter, Moody’s Economy.com says in a new report.
In some of the hardest hit markets, however, prices won’t reach a bottom until 2010 or 2011, the research firm says in a report written by its chief economist, Mark Zandi.
“Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view,” the report says.
It cites signs that home sales are stabilizing as people snap up bargains on foreclosures, a decline in the supply of unsold homes in many areas and expectations of moves by the Obama administration “that will help place a floor under the housing downturn.” Those measures could include lowering mortgage rates further, preventing more foreclosures and generating jobs through higher federal spending.
On average, house prices nationwide will hit bottom in this year’s fourth quarter at a level 36% below the peak reached in the first quarter of 2006, the report says. The price measure is based on the Fiserv Case-Shiller index.
But some areas will be hit much harder. For instance, the Naples-Marco Island, Fla., area is expected to bottom out in the fourth quarter of 2010 with prices 70% below the peak. The report projects that peak-to-trough declines for metro areas will be 66% in Miami, Fla., 63% in Riverside-San Bernardino, Calif., 58% in Phoenix, 56% in Las Vegas, 53% in Los Angeles, 38% in Washington and 33% in New York. Within those metro areas, different neighborhoods are likely to show very divergent performances; the most desirable areas near good schools and jobs are faring much better than other places.
The peak-to-trough decline will exceed 10% in nearly 62% of the nation’s 381 metro areas, the report says, and the drop will be above 20% in about 100 metro areas.
The report is based on a forecast that the recession will end late this year, followed by a “lackluster” recovery. “A number of uncertainties in both the housing and economic outlooks remain, and the risks tilt to the downside,” Mr. Zandi says.