How Far Will Housing Prices Fall In 2009?

[Joanne98]

The year 2008 was horrible for real estate and, according to some experts, 2009 could be worse. Speaking at the World Economic Forum in Davos on Jan. 29, prominent housing economist Ken Rosen suggested home prices could drop an additional 6% to 7% this year.

Rosen, a professor at the University of California at Berkeley, told the Associated Press that the decline in housing prices is only about three-quarters complete, and the cumulative slump could reach 24% this year. To offset such a plunge, Rosen is proposing a foreclosure moratorium to help stabilize the economy. He said as many as 8 million homes could go into foreclosure in the next three years without government action, the AP reported. "I worry about the cumulative decline of all the job losses leading to a second wave of foreclosures. So we have to stop this downward spiral," Rosen said.

Read the whole story here.

http://www.huffingtonpost.com/2009/01/31/how-far-will-housing-pric_n_162803.html

[DJ13]

1. Ken Rosen suggested home prices could drop an additional 6% to 7%

That is a wildly conservative figure considering home prices fell 9.3% in 2008.

"The median sales price of new houses sold in December was $206,500, down 9.3% from the December 2007 median price of $227,700."

http://www.freep.com/article/20090130/BUSINESS04/901300380
U.S. new home sales off 37.8% in 2008, continuing slide | Freep.com | Detroit Free Press

[Joanne98]

2. I thought it was conservative too. I'm thinking 20% or more...

[DJ13]

3. Thats around the same number as I think too

As a homeowner who desperately needs to finance home repairs it pisses me off, as the ever decaying valuation makes trying to get financing next to impossible.

[drexel dave]

8. learn the fine art of dumpster diving

I've re-habed old homes in the inner-city, and you wouldn't believe the plethora of perfectly good construction materials that are tossed away. Boards, two by fours, siding, trim, countertops, I've seen it all.

Dumpsters outside of restaurants or other commercial businesses undergoing renovation are a great place for materials.

As long as you don't mind removing a nail or three, it's a huge help and cost-cutter.

[Warpy]

5. My guess has been in the 10% area

with bigger drops in really depressed areas like Florida.

Nobody is going to take on a 30 year debt until the economy improves enough for them to think their jobs will be safe.

[Skittles]

4. I want them to crash

they are still way, WAY overpriced

[Demobrat]

6. Housing prices are still way too high compared to incomes.

They have at least another 15-20% to go down in the extreme bubble areas like SoCal.

[Still Sensible]

7. I guess it really depends om where you are at

It is my understanding that the decline has been much larger in states on the coasts, which probably makes sense because those areas were the most overpriced. Here in the middle of the country we have seen around a 10% drop so far in my area. But, the tightening of credit has brought existing home sales and new housing starts to a screeching halt all over.

How far they drop before starting to come back will obviously be relative to two things. First, how long it takes to see real positive effects of whatever stimulus package gets passed, and second, how fast the credit market eases up and returns to sanity. (no I am not advocating the insanity of the incredibly easy credit of the last 12 years or so, just reasonable availability).

I think the easing of the credit market will be the most immediate thing that will put the breaks on the downward spiral of home prices. Once credit is available, a lot of people that still have some means, as well as speculators, will start buying "bargains" and the housing market will start back up. Even in that scenario, new housing starts will likely lag for some time.

To hope that the housing market will "crash" is an incredibly callous position to take. For most people their home is the biggest investment they have and the one thing in their lives providing some nest egg for retirement. In other cases it is the second most important nest egg behind a pension or 401K, which no doubt have been hammered even worse than the housing market has.