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Mark Zandi Predicts Another Fallout In US Home Prices In 2010

Towards the end of 2009, we were starting to see a glimmer of light at the end of the tunnel as home sales increased registering its highest levels in more than 2 years. Many thought that we have reached the bottom in home prices with increased interest from home buyers stirring up bidding wars from Florida to Nevada, Silicon Valley and New York.

He envisions that home costs may fall another five percent to 10% in 2010 with some extraordinary cases of thirty percent in places like Miami. There’s a tiny likelihood that home costs may recover in 2011 and it’s still too soon to inform. Zandi fears that the many millions of disturbed loans that don’t get modified will pile up and transform into more foreclosures. RealtyTrac guesstimates that 2,000,000 housing units in the United States are in foreclosure or bank owned. There’s a risk that many more may pile on to the inventory. Zandi is forecasting 2.4 million new foreclosures in 2010. He’s expecting that banks will become more assertive in listing more of their properties in the first part of the year. The bank’s actions of junking more properties in the market will cause prices to fall much more.

Presently, the U.S. housing market is not holding on its own as it is being perked up by the extended first-time-home-buyer tax credit. In addition, the U.S government has been purchasing mortgage-backed-securities or the bundling of home loans since late 2008. The govt. purchases of these instruments have helped keep mortgage rates low and fascinating. Wall St. investors once popularly bought MBS in the hope of earning a good return. This is obviously not true today with the decline of US housing causing the market interest for mortgage-backed stocks to shrink with no investors or speculators. By March of 2010, the US govt. would have finished its acquisition of a huge $1.25 trillion worth of mortgage-backed-securities. There’s debate that the government may end its purchases of mortgage-backed-securities by March 2010. This may lead to mortgage rates to spike by a full point. This can turn away many home purchasers as it raises the price of purchasing a home.

All these factors were incorporated into’s housing price forecast for 2010 with the consideration of local figures for income, population, interest rates and foreclosures. The result covers 100 metropolitan areas. Their 2009 projection of a 14.5% decline were quite accurate and not too far off from the actual 13.2%. According to Zandi, the hardest hit areas as he terms the ‘usual suspects’ such as Nevada, Florida, Arizona and California will experience more foreclosures. He indicated Miami was the worst market where the 2009 median home price of $183,530 is predicted to fall another 33% in 2010.

Zandi points out to the less controversial areas such as the Pacific Northwest, New York and Virginia where prices remain inflated relative to rents. The brighter spots are found in the pockets of the Midwest where the agricultural and energy economies are stronger in places like Dakota, Kansas and Nebraska. Pittsburgh which never experienced a housing bubble is the only housing market that is expected to rise by 0.41% in 2010.

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