We are providing live updates to today’s S&P webinar: Is the Housing Market Bottoming Out? I’m Jim Henry posting this on behalf of Lisa Sarajian.
To join the webinar click here. If you have any questions feel free to ask in the comment section below. We will be addressing these throughout the week.
Question-Lisa Sarajian: Three years into the U.S. housing recovery, sales haven’t been exceptionally strong and we haven’t see seen a real turn around in home prices. What can explain that?
Answer-Beth Ann Bovino: The U.S. housing market has recently been a beacon, of sorts, in the fog. The falling unemployment rate, though still very high, and an uptick in house sales and housing starts have bolstered hopes that a recovery has taken hold. But the Standard & Poor’s Case-Shiller Index revealed that home prices fell steeply in December–the fourth consecutive monthly drop. Home prices are now at 2002 levels. If anything, it looks like we might have reentered a period of decline as we begin 2012.
While it suddenly seems bleak again for U.S. housing, we think prices are close to their “final” bottom. We now forecast S&P/Case-Shiller prices will drop another 4% from where they are now, to a record 36% below the July 2006 peak sometime in the fall. Also, we expect that the Federal Housing Finance Agency home price index won’t reach its trough until next winter. Until that bottom’s finally past, we see potential U.S. homebuyers, exasperated by stricter mortgage underwriting and appraisal standards, continuing to rent–a trend that, naturally, weighs on home sales and prices.