Decline in home prices expected to reach 8%
Home prices are expected to further decrease by 8% this year following the robo-paperwork mess. Signs that further declines in home prices could be gleaned from the market movements.
In February this year, the national forecast for price gains by Fiserv, a market analytics company, has been readjusted to about 4% through the end of 2011 with the company making its latest prediction of a 7.1% drop in home prices for June 30 this year up to the same date of next year.
Meanwhile, the latest S&P Case-Shiller report reveals a 0.2% price drop in the 20 largest metro areas after five months of consistent gains. But Moody’s Analytics is still positive that the price drop will not reach a point of no return.
The myriad of problems besetting the housing market, such as a sluggish economy, large unemployment rate, falling home prices and slow house sales are seen to be responsible for the decline in home prices. The robo-paperwork fiasco did not also help alleviate the current market conditions, but may have aggravated the situation a little further.
While the decline in home prices inevitably results to cheaper homes, people are not necessarily buying. Aside from stability issues, sales are not taking off, because a large number of people are still finding it difficult to find jobs that could pay for their mortgages. And when there are no buyers, home sales could barely perform.
While existing home sales increase to a 4.53 annualized rate in September this year, new home sales are barely making a dent in figures and continue to hover around historic lows not exceeding the annual rate of 307,000.
Morgan Stanley also reported that about 3.1 million borrowers are in serious trouble with their mortgage payments, while Zandi projects half of 4 million delinquent borrowers to go into foreclosure. Amherst Securities is estimating a whopping 11 million defaults.
But Zandi said that low interest rates and an increase in employment opportunities could generate the much-needed boost for the housing industry. With more people finding decent jobs, home sales could just take off in the next few months. But it also warned that if the robo-signed affidavits controversy continues, even the foreign buyers who are exhibiting deep interest in foreclosure investments could well give up on the market along with their capital.
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