By Julie Haviv
U.S. housing markets from Florida to California have suffered price drops of 50 percent or more from their peak, but now, at long last, a bottom is within sight, likely in the fourth quarter nationally, according to a report from Moody's Economy.com.
By the end of the housing downturn, nearly 62 percent of the nation's 381 metropolitan areas will have experienced double-digit-percent declines in house prices, peak-to-trough, says the report by chief economist Mark Zandi and a team that includes Celia Chen, senior director of housing economics.
The declines will exceed 20 percent in about 100 metro areas, according to the report, scheduled to be discussed in a Webcast on Thursday. An advance copy was given exclusively to Reuters.
Despite the gloomy data, the report, by an independent subsidiary of Moody's Corp, paints an improving picture of the housing market, which is in the midst of its worst downturn since the Great Depression and is both the source and a major casualty of the world credit crisis.
An improvement could portend a turnaround for the world's largest economy and help stanch losses at U.S. banks, hit hard by soured mortgage securities.
"Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report said.
"More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability," the report said.
The outlook, however, assumes stronger action by U.S. policymakers and says that even with further government intervention, the recession will keep the housing market from fully recovering until the end of this year.
With this help, sales are probably at bottom, stabilized by foreclosure sales, while construction will hit bottom in the first half of this year, although the pace of housing starts will remain very depressed until 2011.
From the peak to the trough, total single-family home sales will have declined by 40 percent and housing starts by 70 percent.
Zandi's analysis of the impact of the U.S. economic stimulus package has been cited by some of the Obama administration's top advisers.
The Moody's Economy.com report — titled "Housing in Crisis: When Will Metro Markets Recover?" — says home prices in the United States will hit their nadir in the fourth quarter of 2009, with the National Standard & Poor's/Case-Shiller Home Price Index expected to show a 36.2 percent peak-to-trough decline. The peak was reached in the first quarter of 2006.
House prices have fallen in about 70 percent of all metro areas over the past several years and although prices in most metro areas declined modestly during this period, price depreciation from peak exceeded 5 percent in 116 metro areas and exceeded 20 percent in about 50 metro areas.
Those metro areas with the most exposure to subprime and investor lending, which consequently experienced the greatest run-up in prices during the boom, are suffering the greatest declines on the downside of the housing cycle.
Punta Gorda, Florida, is one of the hardest hit U.S. markets. Its house price declines are expected to reach a bottom in the second quarter of 2010, with a peak-to-trough decline forecast at 65.4 percent. The peak was reached in the first quarter of 2006.
House price declines in Stockton, California, are expected to reach a nadir in the fourth quarter of 2009, with a peak-to-trough drop forecast at 67.1 percent. The peak was reached in the first quarter of 2006.
Moody's Economy.com, based in West Chester, Pennsylvania, provides economic research and consulting services to businesses, governments and other institutions.
