Fitch Ratings said U.S. home prices are still overvalued and could fall another 9.1%, despite inching toward a point of sustainability.
After evaluating data from the third quarter, Fitch said prices still have more room to fall with unemployment and gross domestic product numbers showing only marginal growth.
In addition, tightened lending standards remain a hurdle for new buyers, and the $25 billion government settlement with the nation’s largest mortgage servicers is expected to prolong the liquidation of distressed inventory over the short term.
New lending standards continue to hinder housing activity with only borrowers who have equity in their property or sizeable down payments getting loans, the report said.
“The settlement’s modification and foreclosure guidelines, together with the process changes needed to meet the terms of the agreement, are expected to extend the loss-mitigation process for seriously delinquent borrowers,” according to analysts. “However, Fitch does not expect the settlement to materially impact liquidation speeds for existing REO inventory.”
States in the middle of the country possess sturdier home prices, according to Fitch. The ratings agency forecasts steady or rising home prices in Texas, Oklahoma, Kansas, Nebraska, North Dakota and South Dakota.
Fitch said employment and GDP are experiencing mild growth and, if these trends continue, the housing market may see stronger demand.