US housing prices to fall – Economist
U.S. housing prices overall are expected to hit bottom by spring 2011 and begin a gradual rise in 2012, Frank Nothaft, chief economist and vice president of housing lender Freddie Mac said on Wednesday.
“I do think we’ll see these housing prices bottom out, maybe by the spring,” Nothaft said.
Nothaft presented Freddie Mac’s January 2011 Economic Outlook to reporters at the annual International Builders’ Show in Orlando.
Nothaft predicted that potential home buyers who have been sitting on the sidelines will start to get back into the market. He said this prediction is bolstered by historically low mortgage interest rates and other positive economic indicators, a small drop in the rate of unemployment, increases in purchases of durable goods and a slight slowing of serious delinquencies feeding the glut of foreclosed housing stock.
“This is the time to come in the market if you’ve got the financial resources and wherewithal,” Nothaft said.
However, the housing market will continue to recover unevenly around the country with regions of Florida, Nevada and California continuing to slog through the effects of the economic bust, he said.
Homebuilders and suppliers at the home builder event, where attendance is off nearly 50 percent since the show was staged in Orlando in 2005 through 2008, viewed the forecast through the lenses of their home communities’ experience of the recession.
“I’ve been in a crash for four years,” millwork supplier Jeff Thompson of Vero Beach, Florida, told Reuters. “But I’m almost seeing a glimmer of light in getting new projects.”
“We’ve pretty much already bottomed out,” said Jeffrey Capogrossi, a custom homebuilder from Columbia, South Carolina, said. “Now, how long we’re going to stay flat is hard to tell.”
Custom home builder Robert Leslie said his company in Fargo, North Dakota, never stopped growing through the national housing bust.
“Our markets, if anything, just leveled off for awhile. So now, they’re starting to move up,” he said.
Freddie Mac and the National Association of Home Builders are projecting a 20 to 21 percent increase in new housing starts – from 475,000 in 2010 to 575,000 in 2011, according to Nothaft and David Crowe, the NAHB’s chief economist.
“Twenty percent may sound like a really big increase, but keep in mind it comes off a very low base,” Nothaft said.
Justifying the projection for new housing starts, Crowe said the national inventory of new homes is at a 40-year low. In addition, Crowe estimated that 2 million people who normally would have moved into their own homes stayed put through the recession, many of them young adults who remained in their parents’ homes or continued to share living quarters with roommates.
“We have an enormous pent-up demand for households,” Crowe said.
Thompson believes Florida, one of the hardest hit states, is well positioned for a resurgence as a result of the precipitous fall in housing prices and appraisals. “You put all that together and Florida has become affordable again like back in the 1960s, 70s and 80s,” Thompson said. “I think there are a lot of opportunities that are coming our way. We are on the cusp.”
Source: Reuters