The chief economist at S&P is forecasting a drop in home prices of 8% through Q4 2008.
David Wyss, chief economist at Standard & Poors, has forecast a price drop of about 8 percent for the 24-month period through the fourth quarter of 2008.
His prediction came during a general economic outlook session at the Mortgage Bankers Association's (MBA) National Secondary Market Conference & Expo in New York this week.
Housing prices will suffer from a "significant increase in defaults and foreclosures," he said, with affordability still a major issue. Wyss worried how hard the slump will hit already highly inflated housing markets.
He said its impact on areas like South Florida, where much of the buying is speculative investment in second homes, could be big. "You don't need a second home," Wyss said.
Overall, he said he expects the U.S. economy to slow this year to a growth rate of about 2.25 percent, down from 3.3 percent last year.
Celia Chen, Moody's Economy.com's director of housing economics followed Wyss' lead. "We also have an 8 percent decline in median house prices [for the 24-month period ending March 31, 2008], which is consistent with what David Wyss had."
1. There are still some wildcards in all of this:
2. excess housing inventory currently on the market,
3. people that want to sell there house, but will not sell into a weak market (shadow supply, basically supply that is not on the market yet), effects of tighter underwriting standards,
4. there are still a lot of ARMs that need to reset,
5. slowing economic growth,
6. the foreclosure problem persists and could grow,
7. not all of the credit weaknesses in the mortgage market have been flushed out yet.
8. high owner/occupied vacancy rates,
9. the appetite of the credit markets to absorb additional non-traditional mortgages.This isn’t over by a long shot. The difficult housing market will persist into at least 2009 in some markets.