Housing prices will drop four more percentage points and they won’t bottom out until next fall. That’s the latest forecast from Standard & Poor’s housing experts, from a Webcast on the US Housing Market distributed to investors and the media.
The 1.6 to 2 million properties that will be released following the finalization of the multi-state attorneys general settlement yesterday will depress housing markets enough to drive prices down another four points in the S&P/ Case-Shiller index, the experts said.
“The shadow inventory is a key concern for the housing market. There are about 4 million homes sold annually. We don’t expect them to dump all two million on the market all at once. That’s the reason for our estimate that prices won’t bottom out until the fall,” said Erkan Erturk, Senior Director, Structured Finance Global Research.
The S&P/ Case-Shiller Index has fallen 34 percent since its peak in 2006 and reached a new low in December. It is expected to fall four more points before the bottom is reached, said Beth Ann Bovino S&P Ratings Service’s deputy chief economist.
“Prices are affordable. Mortgage rates are low. Yet people are afraid to buy,” she said. She said unemployment will remain high as long-time unemployed and under employed workers re-enter the work force.