Headlines – Week of January 10, 2010
January 15, 2010
Will Home Prices Go Down in 2010?
Real estate researchers differ on where prices are headed in 2010
As the articles below indicate, some experts are saying prices have hit bottom in the home market. Some are even saying prices are undervalued in many markets. Others are predicting that prices will fall even further throughout 2010. Here a few of the current predictions s by some the country’s leading firms.
Fiserv Lending Solutions, a financial analytics firm, predicts that prices will decline an average of 11.3 percent in 342 of the 381 markets it covers.
Moody’s Economy.com foresees another 8 percent drop, with Arizona, California, Florida, and Nevada feeling even more pain.
Shari Olefson, author of Foreclosure Nation: Mortgaging the American Dream, predicts a national average decline in prices of about 10 percent in 2010.
Peter Schiff, president of Euro Pacific Capital and the most bearish of the bears, says real estate prices could possibly fall another 30 percent before they hit bottom.
NATIONAL ASSOCIATION OF REALTORS®Chief Economist Lawrence Yun sees it all differently. He predicts home prices will rise more than 3 percent in 2010.
Much of the discrepancy among these predictions is over statistics surrounding the foreclosure market. Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. The volume of this so-called ‘ghost or shadow inventory’ could be substantial enough to depress already steeply falling prices when it does go on the market and banks are moving slowly to list repossessed homes for sale, which could mean that housing inventory is even more bloated than current statistics indicate.
RealtyTrac, the online marketer of foreclosed properties, recently discovered that it has far more foreclosed properties listed in its database, which the company compiles using courthouse records, than there are listed in the multiple listing services (MLS) maintained by real estate agents.
RealtyTrac looked at listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database.
The National Association of Realtors calculates official housing inventory statistics using data from the multiple listing services. By that measure, there were 4.2 million existing homes for sale in November, an 11.2-month supply at the current sales pace, up from a 10.3-month supply in October. Many properties that should be listed on the MLS are not listed on the MLS therefore underestimating the situation. And if that’s the case, it could take much longer for the housing market recovery than analysts currently expect.
Opinion offered by Scott R. Lodde
Cities With the Biggest Price Drops (from Forbes.com)
Cities that experienced housing recessions were affected as much by local economic factors as they were by national ones, according to a study by Local Market Monitor for Forbes magazine.
To find the cities where home values fell the most, Local Market Monitor looked at where the Federal Housing Finance Agency’s Home Price Index had fallen the most from that market’s peak, to the third quarter of 2009. The FHFA index is derived from data on all mortgages bought or backed by Fannie Mae and Freddie Mac.
Cities that have lost the most value are concentrated in the Midwest where unemployment has taken its toll, and in parts of California, Florida, and Nevada where the rising cost of housing encouraged home buyers to gamble on their ability to afford housing long term.
On average, housing markets on the West Coast lost the most value – 21.6 percent since their peak. Florida lost 31 percent. The Northeast lost an average of 8.6 percent, and the Midwest on average lost only 5.6 percent.
The cities that lost the most home value in the South are concentrated in Florida, where Port St. Lucie tops the list at -46.43 and Cape Coral is second at -46.38. Somewhat surprisingly is that Naples is third on the list at -43.63.
Here are the top five cities in each region that lost the most value:
- 1. Merced, Calif.: -62.11 percent
- 2. Stockton, Calif.: -54.29
- 3. Modesto, Calif.: -52.42
- 4. Vallejo-Fairfield, Calif.: -47.62
- 5. Las Vegas-Paradise, Nev.: -47.53
- 1. Port St. Lucie, Fla.: -46.43 percent
- 2. Cape Coral-Fort-Myers, Fla.: -46.38
- 3. Naples-Marco Island, Fla.: -43.63
- 4. Bradenton-Sarasota-Venice, Fla.: -41.52
- 5. Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla. -39.93
- 1. Detroit-Livonia, Mich., -30.66
- 2. Warren-Troy-Farmington Hills, Mich., -27.95
- 3. Flint, Mich., -27.47
- 4. Ann Arbor, Mich., -20.37
- 5. Jackson, Mich., -17.30
- 1. Providence-New Bedford, R.I., -17.30
- 2. Worcester, Mass., -16.17
- 3. Atlantic City, N.J., -16.15
- 4. Poughkeepsie-Newburgh, N.Y., -14.60
- 5. Barnstable Town, Mass., -14.48
Housing Undervalued? (from Global Insight)
Housing researcher Global Insight recently released a study of U.S. housing prices that points to the magnitude of the collapse of values.
Nationwide, Global found housing values were about 10 percent undervalued, based on a model that examines interest rates, household incomes, population, and historical price patterns. That’s a modest number compared to metro areas hardest hit by the housing recession.
In Fort Lauderdale, Fla., Global calculated that housing prices were 24 percent undervalued as of the third quarter of 2009. Three years ago, it said the area was 44 percent overvalued. Global calculates that Las Vegas is now undervalued by 41 percent compared to being 33 percent overvalued in 2006.
Report: Home Prices Likely to Hit Bottom in March (from First American CoreLogic)
Home prices in 45 of the largest housing markets are expected to fall another 4.2 percent before they hit bottom in March, according to First American CoreLogic’s Loan Performance Home Price Index.
By October 2010, prices are expected to be heading upward again by about 1 percent compared to 2009.
The report warned that this progress could be jeopardized by an increasingly large “shadow inventory” of homes owned by banks but not yet on the market. The problem is particularly acute in Michigan and Ohio cities, the report said. It projected a 12.7 percent further decline in values in Detroit, an 11.4 percent decline in most of the rest of southeast Michigan, and a 6.3 percent fall in Cleveland.
The report expects the strongest recoveries next year in California cities. These include:
- San Francisco, up 5.7 percent
- Los Angeles, 5 percent
- San Diego, 4.7 percent
- Sacramento, 4.6 percent