Moody’s Housing Forecast in 2010
Wednesday, March 10th, 2010Mark Zandi, the chief economist for Moody’s Economy.com, agrees that the short-term housing market has shown signs of stabilization with hints at a modest recovery. His 2010 forecast is not the rosy picture that the National Association of Realtors likes to promote.
Zandi took a long, hard look at several factors and at the results of 2009 and projects a 5-10% fall in the 2010 housing prices. In certain areas, like Miami Florida, Zandi goes further, predicting as much as a 30% decline.
The primary reason for his prediction is the number of foreclosures expected to occur between now and the end of next year. Currently, there are more than 2 million homes in foreclosure or already owned by the bank. Zandi projects that in 2010 another 2.4 million homes will enter the foreclosure process. Zandi believes the bank will now become more aggressive about foreclosing and placing homes on the market. This will drive prices for existing homes even lower than the current levels.
Zandi’s second concern is the state of the national employment market. The high unemployment rate is not expected to improve until the third or fourth quarter of 2010. Unrest about employment is a major contributor to the fall in demand, which in turn lowers values. Until consumers begin to feel secure in their workplace, Zandi says the market will feel the weight.
Zandi also points out the weakness of the government’s aggressive but dimmed stance concerning loan modification as well as the 2009 first time homebuyer tax credit the Federal Reserve’s purchase of mortgage backed securities. While these programs have buoyed the market, they are set to expire in the spring of 2010.
The result is that mortgage rates may increase by as much as one point, which will further impact the market’s demand. Anything that raises the cost of purchasing a home will lower market values.
