(Source: Record, The; Bergen County, N.J. By KATHLEEN LYNN) – Home prices may drop as much as 25 percent, after inflation, over the next five years, economist Robert Shiller, co-founder of the Standard & Poor’s/Case-Shiller home price index, said Thursday.“A 10 to 25 percent further decline in real home prices over the next five years would not surprise me at all,” Shiller said at a Standard & Poor’s housing summit in New York.
Shiller, a Yale professor, said it’s possible that the market will follow the grim path seen in Japan after a 1980s housing bubble. Property values there declined every year for about 15 years, dropping by two-thirds overall, he said.
But he cautioned that he was not making a forecast, saying that since the recent housing boom-and-bust cycle was the biggest in U.S. history, he can’t use previous housing patterns to figure out where this market is headed.
“It’s impossible for statisticians to forecast,” he said. “I honestly don’t know.”
Other housing analysts have recently predicted that prices will continue to drift lower this year and “bounce along the bottom” for a while, but the loss mentioned by Shiller is larger than most experts have forecast.
Shiller was joined Thursday by a number of housing experts, most of them also pessimistic about the housing market’s short-term prospects.
Keith Fox, president of McGraw-Hill Construction, which tracks the building industry, predicted that about 640,000 single- and multifamily units will be built in the U.S. this year. While that’s an improvement over the past few years, it’s well below the 2.2 million units produced in 2005.
“You can clearly see how depressed this market remains,” Fox said. And when residential construction dries up, other types of construction — including retail, schools, offices and even roads — also slow down, because there are fewer new homeowners to use them, he said.
Fox said, however, that residential construction should post healthier gains in 2012 and 2013.
Other analysts said the high rate of homes in the foreclosure process will continue to weigh on the market. Diane Westerback, a managing director at Standard & Poor’s, said clearing the market of foreclosure properties will take longer in states such as New Jersey, where lenders must go through the courts to repossess homes. Foreclosure activity has slowed to a crawl in the state as lenders try to prove that they are following the correct legal procedures, after questions were raised last fall.
Christopher Mayer, a professor at Columbia University, said that homes on the market, plus those that will be dumped on the market because their owners can’t pay their mortgages, add up to about 1 1/ 2 years’ worth of housing inventory. Given those numbers, he said, “house prices are going to continue to fall.”
Thomas Gleason, a housing finance executive from Massachusetts, brought up the adage, “May you live in interesting times.”
“As my kids would say, ‘Been there, done that,’ ” he said. “I’d like to live in a time where there’s a fully functioning housing market. That would be really interesting.”
In other housing news Thursday:
* The Obama administration said it will withhold financial incentives from the three largest U.S. mortgage lenders. Wells Fargo & Co., Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said.
Based on those lenders’ performance for the first three months of 2011, the government is withholding financial incentives that amounted to up to $1,000 per permanent loan modification. Treasury said the three lenders incorrectly determined that many people were ineligible for the program.
The lenders are disputing the data, saying the findings are based on old reports. Wells Fargo is formally appealing the government’s decision to cut off its incentives.
The three lenders have already received $24 million from the government.
* Freddie Mac reported that fixed mortgage rates dropped for the eighth straight week, with the average rate on the 30-year loan at 4.49 percent, down from 4.55 percent. The average rate on the 15- year fixed mortgage, a popular refinance option, slipped to 3.68 percent from 3.74 percent. Both are lows for the year.
Originally published by This article contains material from The Associated Press.E-mail: lynn@northjersey.com.
(c) 2011 Record, The; Bergen County, N.J.. Provided by ProQuest LLC. All rights Reserved.
A service of YellowBrix, Inc. Publication date: 2011-06-10
While house prices may feel competition from foreclosures over the next few years as these foreclosures are put on the market, my wife and I have made the tactical decision to purchase a second home that is in nice neighborhood only 1 minute from the heart of our cities downtown. The house is now under contract for around 47 cents on the tax appraisel dollar. We view this an an investment, as we can rent the house to a growing number of folks looking to move back into the heart of our cities urban center, and into a very historic neighborhood that is undergoing an amazing rennaissance. Even if we don’t rent eith unit in the house, we can save a ton by staying there throughout the week and then staying at our ‘real’ house out in the country. I guess what I am saying that when everyone is predicting doom and gloom, we feel it is time to buy, because chasing the market is never profittable! Even if this second home doesn’t appreciate in the next five years, in ten or twenty, it likely will and during these years we will enjoy being centered in a convienant place in the city! So all the people harping on the sad state of housing should look around. I SEE A LOT OF OPPORTUNITY!!!
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