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“Home Prices Will Decline by an Additional 5%-7% From the 2006 Peak”

Posted on | July 6, 2009 | No Comments

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S&P’s chief economist David Wyss expects “home prices will decline by an additional 5%-7% from the 2006 peak before residential real estate prices start to stabilize in the first half of 2010, marking an overall decline of approximately 37% from the July 2006 peak.”  I would argue that it will be much worse than 5%-7%. Overall, the Case-Shiller housing index is off 33.1% since the top in July of 2006.  Another 5%-7% would mean that the housing market bottom would see a 40% nationwide loss.

The reason that Wyss feels the losses will extend is because of the Alt-A and Subprime mortgages still on the books.  The reason that I think that losses will be even worse than that is the accleration of unemployment WITH a stimulus package.  The stimulus package was expected to slow job losses by the 2nd quarter of 2009.  This obviously has not happened as we still seeing an increase in the national unemployment rate.

As I have stated many times in the past, if Americans do not have jobs and they continue to see an up trending unemployment chart, the economy is not going to get better.  Part of the battle that President Obama is having is the psychology of the overall economy.  Just trying to convince Americans that things are getting better is an uphill battle that he is not winning.  The Obama Refinance plan was an attempt, but that seems to not be working that well either.  There are good reasons why Americans do not believe this, but if there was any positive sentiment, we would likely see “some” improvement.

The worst part is that mortgage rates are likely to rise in the next few weeks which is exactly what the housing market does not need.  No one knows when we will see a bottom in housing, but maybe after average mortgage rates rise and we flush out most of the foreclosures and short sales we might see a bottom.  This will obviously take quite a bit of time, but it needs to happen sooner rather than later.

Category: Home Prices, housing market
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