The nadir for home prices appears to be still more than a year away, although some analysts are starting to publish views with bearish estimates, according to Bank of America Merrill Lynch strategists, who see improving buyer outlook pushing home prices to a near-term bottom in January before rising again in February. “Currently, our view is toward the benign side relative to the market’s expectations, we think,” BofAML strategists wrote in a nonagency MBS Research Alert. Chris Flanagan, Ryan Asato and Timothy Isgro said their model calls for home prices reaching a bottom in the second quarter of 2012. The analysts expect the Standard & Poor’s Case Shiller home price index to fall another 4.1% from its third-quarter level. They said the index is down 3.4% from its June peak and not far off its low in May 2009. The BofAML strategists believe there’s “evidence that home buyer outlook for prices is correlated to subsequent short-term home price movements.” The homebuyer outlook data is gathered in the monthly survey by the National Association of Realtors. The data implies the Case-Shiller index for the largest 20 metropolitan areas of the country will bottom out in January at 5.6% lower than the June peak. The index will then start climbing in February, according to Flanagan, Asato and Isgro. “We think the December reversal in buyer outlook is a positive short-term sign for housing,” they said. “It is commensurate with the broader increase in consumer confidence and also provides a measure of support for the price increase in nonagency MBS since the start of the year.” Write to Jason Philyaw.
BofAML strategists see bottom for housing prices in 2Q of 2012
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