Home prices are seen ticking up modestly in 2012, according to a Reuters poll released last Friday. But the real news: economists were split as to what a recovery is looking like.
Of 28 economists polled, 14 said that prices had either already hit bottom this year or would by the fourth quarter. Twelve respondents said prices won’t reach a trough until 2012, while one forecast 2013 and one expected it would take until 2014.
Existing home sales are expected to improve modestly in the coming months. The forecasts from the poll are consistent with expectations the housing sector will continue to limp along in a weakened state for years to come.
Analysts agreed that recovery in the housing market is dependent on improvement in the labor market and broader economy. This matches the description of a “sawtooth recovery” that I have been discussing with clients for the past 12 months.
One of the big concerns is that there are a lot of homes where the mortgage holder is still underwater and most of those homeowners will continue to make payments.
It gets to be a problem, however, if somebody loses their job, somebody gets sick, there’s a divorce or any incident where the home has to be sold.
“New foreclosures peaked in 2009, but the inventory of foreclosed homes will decline only slowly,” said David Berson, chief economist at mortgage insurer PMI Group.
U.S. home prices — as measured by Standard & Poor’s/Case-Shiller 20-City Composite Home Price Index — will fall 3.8 percent for the year, before stabilizing and gaining 0.8 percent in 2012, according to the median forecast of 22 economists in the Reuters poll taken over the past week.
The expectations were improved from the previous Reuters housing poll in June, which forecast prices would fall 5.0 percent this year and rise just 0.5 percent next year.
The forecasts for the changes in the home price index for this year had a wide range, from a decline of 14.0 percent to a gain of 0.1 percent. The forecasts for 2012 had a smaller gap, from a decline of 6.0 percent to a gain of 4.0 percent.
In the third quarter, the pace of existing home sales is expected to come in at a 4.78 million annualized rate and will edge up to 4.95 million in the fourth quarter. Sales of previously owned homes were at an annual rate of 4.67 million units in July, according to data from the National Association of Realtors.
Economists saw the rate of home sales coming in at 5.1 million for both the first and second quarter of next year.
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