Most homeowners thought they had weathered the worst of the collapse in the housing market — those who still have their homes, that is. CNN Money now says that any feeling of relief at stabilizing home values will only be temporary. Housing prices will fall another 11% by next summer, thanks to a new wave of foreclosures predicted in the coming months:
If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.
Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.
Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.
In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope.
Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said.
While the decline will be widespread, much of the damage will be contained to specific markets. These are the same that have already been hard hit by the housing bubble collapse, namely Miami, Orlando, Southern California, Las Vegas, and Phoenix, among others. Homeowners in these markets will see large decreases in their home values on top of what they have already lost, as much as 30% in Miami, for example.
However, almost all markets will feel the pinch. For many Americans, their home represents their greatest investment, with the equity used later to to boost retirement by downsizing. The size, depth, and breadth of these losses in an election year may have some significant impact on the midterms. Democrats will almost certainly try to blame George Bush, but they will have controlled Congress for almost four years by the time the elections come next November. With high unemployment and crashing home values in the forefront of voters’ minds, they will be looking to clean house … assuming, of course, that they still own one.