Real Estate Market

Fiserv 2011 housing recovery forecast mirrors NAR projections

(11/19/2010) Erate Exclusive - The home buyer tax credit delayed the housing market's slide to the bottom, and that will put off the recovery until late 2011.

Fiserv and Moody's expect that home prices will drop over the next four quarters in nearly all metro markets, before prices have a shot at stabilizing by the end of 2011.

"Some of the largest declines in prices will occur in markets that had strong spring and summer 2010 price increases," said David Stiff, chief economist at Fiserv.

"This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels," Stiff added.

Findings from the recent "Fiserv Case-Shiller Home Price Insight," is based on data from Fiserv, Inc.'s Case-Shiller Indexesand from the Federal Housing Finance Agency (FHFA).

Its forecast for a late 2010 housing recovery mirrors a recent report earlier this month from the National Association of Realtors (NAR).

Both reports, offering the same timing for housing market recovery, also both blame chronic high unemployment and the large number of foreclosed and other distressed properties on the market.

NAR added tight credit as a reason the housing market is still on the ropes.

"Tight credit and appraisals coming in below a negotiated price continue to constrain the market. Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves" late next year, said Lawrence Yun, NAR chief economist.

The reports also reveal why, at 66.9 percent in the third quarter, the rate of home ownership was the lowest it's been since the first quarter of 1999.

Other observations from the Fiserv's second quarter, 2010 analysis of home price trends in more than 375 U.S. markets include:

• In the second quarter of 2010, U.S. single-family home prices rose an average of 3.6 percent over the same year-ago quarter, driven by strong price increases in relatively high-priced markets, such as San Diego, Washington, D.C., and the San Francisco Bay Area.

• Despite the overall gain, prices toppled in 70 percent of the 384 metro areas, compared to the 2009 second quarter. Many markets experienced double-digit drops, including Detroit, MI; Boise, ID; Reno, NV and many smaller markets in Florida and Oregon.

For example, prices in Phoenix increased by 5.5 percent from the 2009 second quarter to the 2010 second quarter, but are expected to fall by 16 percent over the next four quarters ending in second quarter 2011.

• With few exceptions in individual cities, the first, and most significant local declines, occurred between the peak of the housing bubble and the summer of 2009, with tax credit induced price increases happening between the summers of 2009 and 2010.

Fiserv expects that the second double-dip declines will continue through the rest of this year until the end of next summer.

"Many of the metro areas that were fortunate enough to have a spring and summer bounce will experience double-dip price declines. If there are no downside surprises for the economy or the housing and mortgage markets, home prices should start to stabilize at the end of 2011," Stiff added.

The Fiserv Case-Shiller Indexes also forecast that average single-family home prices still have a more than 7 percent decline ahead during the next 12 months, with prices in hardest hit markets expected to plummet even further.

That's identical to the level of decline NAR says is ahead for existing home prices, nationwide, year-over-year in the first and second quarter's next year.

Fiserv says from the second quarter of 2010 through the second quarter of 2011, average home prices in Nevada, Arizona and Florida are projected to decline 12.4 percent, 11.5 percent and 9.4 percent, respectively. In addition, home prices are projected to decline 12.7 percent in the District of Columbia.


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