Housing Market to Clear Up as Prices Continue Drop

The decline of housing sales will continue well into 2010, but the good news is that the end is now in sight, according to analysts at Deutsche Bank. Fitch Ratings also predicts home prices will fall an additional 12.5% during this period, reverting to 2002 prices. Currently, prices are more in line with the average cost of a home in 2003, the ratings agency reports. The news comes as part of systematic revisions in housing projections from research departments across the nation. For its part, Fitch claimed in an October 2008 forecast prices would tumble only 10%. Since then, the macroeconomic climate in the nation became darker. “Very weak employment, limited re-financing opportunities and turbulent financial markets have extended into the first months of 2009, while government-initiated programs have yet to yield any positive benefits,” says Huxley Somerville, head of Fitch’s mortgage-backed securities group. As of today, home prices have fallen an average of 27% from historically highs achieved in mid-2006. However, Deutsche Bank says there are some tentative signs that new and existing home sales are near a bottom and opportunistic home buying is on the up. Nonetheless, sales of homes will not see a remarkable boost until home prices decline further relative to rent costs, in order to achieve fair value. Also, the labor market must eventually stabilize, as further job deterioration will weigh on the housing sector, states the investment bank in recent economic research. Write to Jacob Gaffney at [email protected].

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