Fitch: Another 10% Drop in Home Prices Expected
Fitch Ratings said that it expects home prices to drop another 10 percent before stabilizing in 2010. So far, home prices have fallen 22 percent and will likely decrease by 30 percent from peak prices in 2006. Fitch indicated that the expected drop would reverse the home price increases achieved between 2004 and 2006. Prices are currently at early 2004 levels and will likely return to 2003 levels before the pace of decline will moderate, the agency said.
“Should economic conditions become much worse than expected, home prices would decline more than Fitch’s projection and price stabilization would be delayed,” noted Huxley Somerville, Group Managing Director and U.S. Residential Mortgage Backed Securities Group head at Fitch. “Higher mortgage rates and tighter underwriting also will continue to put downward pressure on prices.” Appraisal Institute Frank Lucco, SRA, of Houston, stated, “I’m glad people are realizing that home price stabilization is not going to be a 90-day fix. More and more experts are referencing 2010 and beyond, which makes much more sense.”
According to Suzanne Mistretta, Senior Director at Fitch, “Government programs such as the U.S. Treasury’s Trouble Asset Relief Program and expanded mandates for Fannie Mae, Freddie Mac and Federal Housing Administration to increase loan purchases and originations may facilitate liquidity in the housing markets, which could have a positive impact on prices.”