Plunging Home Prices Avoid RMBS Cut
California, Arizona and Florida home prices will fall considerably farther before stabilizing in late 2010, according to the latest US home price forecast from Fitch Ratings released today. Additionally the credit agency is reporting that, for now, residential mortgage-backed securities (RMBS) tied to the properties remain unchanged. California is likely to lead the way with an additional 36% decline in home prices over the next 12 to 18 months, while Florida and Arizona are expected see prices plunge over 20% from today's levels. Not surprisingly, these states saw the largest run up in prices between 2002 and 2006. To date, home prices in these three states fell by a whopping 40% on average peak-to-trough. However, Fitch says the additional declines remain within the ranges previously predicted in its RMBS rating actions and therefore, are not expected to lead directly to any widespread negative rating actions. California, Arizona and Florida account for about 50% of the overall non-agency mortgage origination volume over the past four years. Home price declines in the higher volume states outside of these three fared substantially better and are expected to see more moderate declines, Fitch says. Places such as Texas and Illinois are anticipated to see further declines of 1% and 9% respectively and New York prices are forecast to fall an additional 11% before the market reaches stabilization. Write to Kelly Curran.