Despite a double-dip in home prices that begin last year and continued through the first quarter of 2011, the Fiserv Case-Shiller Home Price Indexes are projecting home prices to begin stabilizing in early 2012.
With an average first quarter price decline of 5.1% across the nation, home prices continued to be dragged down by slumping demand, and a jump in foreclosure sales that were temporarily stalled by foreclosure processing issues that arose at the end of 2010.
"The stabilization of housing markets depends greatly on household confidence in the strength of the economic recovery," said Fiserv Chief Economist David Stiff. "Unfortunately, recent economic news has done little to build confidence. Weak job growth numbers in May and June, political wrangling over the Federal government debt ceiling, and the ongoing debt crisis in Europe have all increased pessimism. Households will not become more optimistic about housing markets until they are convinced that the job market is improving and that politicians will not allow debt problems to become new economic catastrophes."
However, despite the underlying weakness in the housing markets, Stiff notes positive trends that point to a housing price stabilization to begin in the first quarter of 2012. "Mortgage delinquency rates have been falling for more than a year. Foreclosure rates have started to decline. The flood of bank-owned sales, which has swamped many markets, will finally begin to recede this year as fewer houses enter the foreclosure pipeline. Meanwhile, housing affordability has nearly returned to pre-bubble levels," said Stiff. "Relative to family income levels, the average U.S. home is now only 5 percent more expensive than it was in 2000."
Between the first quarters of 2012 and 2013, Fiserv projects that home prices will rise by an average of 2.7% nationally in a growing, broad based recovery. The projections estimate that during this period, home prices will experience increases in 365 out of the 384 metropolitan areas review in the indexes.