Price Increases Coming in Foreclosure Hot Spots?
Another report based on Metropolitan Regional Information Systems data says the supply of for-sale homes in the Washington area fell in July, to 5.3 months' worth. "That level of supply is considered at or below equilibrium," according to the folks at Metrostudy, a consultant hired by MRIS, the local multiple listing service. And because supply is below the six-month threshold that marks a balanced market, they expected prices to rise soon.
"We are expecting significant -- more than 10 percent -- year-over-year increases in resale prices to begin in Loudoun in August and in [Fairfax and Arlington counties] and Prince William in September," said Ken Wenhold, director of Metrostudy's mid-Atlantic region. The report says the inventory of for-sale homes also shrank in the District and Maryland suburbs, except for Charles and Calvert counties, where it increased slightly.
Big surprise: Prince George's County could be one of the first in Maryland to recover. The supply of homes has been shrinking rapidly lately. "Prince George's could potentially approach equilibrium (where demand and supply are balanced) early next spring, an idea nearly inconceivable just last year," Wenhold said.
However ... not everyone agrees. A new report from the Center for Economic and Policy Research and the National Low Income Housing Coalition, "Hitting Bottom? An Updated analysis of Rents and the Price of Housing in 100 Metropolitan Areas," says home prices in the Washington area are still too far above the rent for a comparable home, and therefore home values will continue to fall. In fact the Washington-area market (extending out to West Virginia) is in for bigger losses in home equity than we experienced last year, according to study authors Danilo Pelletiere, Hye Jin Rho and Dean Baker.
And then there's the ultra-gloomy prognosis released last week by analysts at Deutsche Bank. According to Bloomberg News, Deutsche Bank analysts expect U.S. home prices to fall through the first quarter of 2011. Prices will fall an additional 14 percent, on average, the bank says. It says 48 percent of all mortgages could end up underwater -- greater than the home's value -- by that time.
Everybody has their own interests at stake. Real estate companies like MRIS root for improving markets; Deutsche Bank worries about continued lending losses; CEPR and NLIHC want to boost the supply of affordable housing. Who do you think has it right?
August 12, 2009; 6:00 AM ET
Categories: Foreclosure , Mortgages , Statistics , The economy , The market
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