Will Home Prices Bottom In 2011?
CALCULATED RISK has Case Shiller, Price to Rent Ratio, and Median Income to Price graphs all indicating home prices will fall 10%, or just over 10%, nationally in 2011. I agree– unless there is second dip recession or further financial crisis.
Local markets are different. California has a one year hidden inventory of unlisted REOs, not yet foreclosed defaulted mortgages (320,000), and homeowners in default without recorded notices of default, with a total shadow inventory of 464,000 homes and listed inventory of 142,000. Further, California has a price to rent ratio much higher than other markets in most of the state, 1.4x ; a much lower median income to price ratio in coastal California, and a much higher unemployment rate than the rest of the nation, 12.7%.
I agree with Fitch’s rating service– coastal California can expect to see a further 35% decline in home prices in 2011-2012. Not calculated is the projected negative domestic migration out of coastal California the Legislative Analysts Office estimates at -224,000 for 2011.
Nationally the projections are good for housing. But it doesn’t fix the broken mortgage market which could change these projections.