House prices may decline into early 2011

07.08.09
By Sarah Beldo

First-time homebuyers who still need to get their credit score in shape or save up for a down payment may have a couple of more years to take advantage of lower prices.

According to predictions from mortgage insurer PMI Group, house prices in many large U.S. cities are likely to continue to fall through at least March 2011.

"The housing market has been hit by a demand shock of high unemployment and a supply shock of distressed foreclosure sales," PMI senior economist LaVaughn Henry told Bloomberg.

Despite the Obama administration's efforts to help families avoid foreclosure, the number of families losing their houses because they are unable to keep up with home loan payments continues to rise.

The PMI data indicates that in some of the areas that have been worst hit by the housing market crash, there is a 99 percent chance that there will be lower property prices in the first quarter of 2011. Many of these cities are located in Florida, California, Nevada and Arizona.

Out of the 50 most populated metro areas in the U.S., 28 were judged by the insurer's report to be in the highest risk category for price drops.

Analysts have been raising concerns about the potential that the housing market may not recover as quickly as hoped.

However, some recent industry reports have shown a moderation in the decline of property values, giving tentative hope that the market could turn around. For example, the Case-Shiller Home Price Index showed that the pace of home value deterioration had slowed.

"It seems that some stabilization may be appearing in some of the regions," commented David Blitzer of Standard & Poor's.

But will the U.S. housing market be able to overcome the formidable challenges of growing foreclosures, increased joblessness, an unsteady economy and weakened consumer demand? Only time will tell.

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