Home prices ready for rebound? Not quite, analysts say
Large inventories, foreclosures indicate big cities might still be hurting this time next year
WASHINGTON — Thought the housing crisis was over? Not quite.
Despite four years of falling prices and recent signs that they were finally bottoming out, homes are expected to lose even more value in many metro areas during the next year.
Parts of the country already pummeled by the housing crisis including Las Vegas, Phoenix and Miami will be hit hardest. But even some places that have rebounded or held up relatively well — New York, Los Angeles and Washington among them — will suffer, too.
That’s the conclusion of economists who have been reducing their estimates for home prices as the outlook for the economic recovery has darkened.
The number of homes for sale or headed for foreclosure is so high that they think prices will be even lower by next July.
Because housing is such an important engine of the economy, lower prices could dim the recovery. When home values fall and people have less equity, they tend to cut back on spending. As prices decline, potential homebuyers stay on the sidelines, slowing sales even more.
Earlier this year, analysts said they thought home prices had reached their low point and were ready to start rising slowly in most areas. Now, they think the bottom could be nearly a year away.
The average home price in the Standard & Poor’s Case-Shiller index of 20 big U.S. cities is forecast to drop nearly 2 percent this year from a year earlier, according to the average estimate of more than 100 economists polled this month by MacroMarkets.
That’s more pessimistic than in May, when Latest tax figures show most Central Texas property values stay flat or drop, Page One the consensus was for prices to be nearly flat. More bearish analysts think prices will sink 10 percent or more.
Price drops of more than 10 percent are expected in the Phoenix, Miami and Las Vegas areas during the next year, according to Moody’s Analytics. Those areas have already been scorched by 50 percent declines in home values.
Moody’s predicts declines of 2 to 8 percent by next July in New York; Los Angeles; San Diego; San Francisco; Denver; Detroit; Cleveland; Minneapolis; Tampa, Fla.; and Washington.
Why further price drops for already-hard-hit areas as well as those healthier markets?
There’s already a glut of homes in each area, and more foreclosures are expected as Ameri-
cans fall behind on mortgage payments. Foreclosures add to the supply of homes on the market, bringing down prices.
Contributing to the problem is an economy grappling with high unemployment, relatively flat pay and tightened credit, all working to limit the number of people buying homes.
It could be a decade before the average price nationally reaches the peak it hit four summers ago, says Celia Chen, chief housing economist at Moody’s. Even when they do resume rising, prices may not outpace inflation.
The median price peaked at $230,300 in July 2006 before tumbling 28 percent to a low of $164,700 in January 2009, according to the National Association of Realtors. The median has since risen to $183,700.
Nationally, about 7.1 million homeowners — more than 13 percent of households with a mortgage — have missed at least one payment or are in foreclosure, according to data provider Lender Processing Services Inc.
“Even when demand picks up, prices aren’t likely to budge all that much,” said Mark Vitner, senior economist with Wells Fargo Securities.
Moody’s forecasts flat or only slightly lower prices over the next year in Atlanta; Chicago; Boston; Dallas; and Portland, Ore. Seattle and Charlotte, N.C., are expected to enjoy slight price increases. In those areas, the supply of foreclosure homes is smaller, and the local economies are faring better.
Sales of new homes jumped last month, but it still was the second-weakest month in the 47 years records have been kept, the Commerce Department said Monday. Sales for April and March were also revised downward.