Fitch says US House Prices to Fall Another 12.5%
U.S. home prices will fall an additional 12.5% from 2008’s year end values before exhibiting more stability in late 2010, according to Fitch Ratings. This forecast reflects a reversion to early 2002’s prices. Currently, prices are hovering around levels seen in mid 2003.
Fitch revised its projection from earlier expectations of a 10% further decline as of second quarter-2008 (2Q’08). The revision to Fitch’s October 2008 forecast is due to the extremely weak economic factors in the fourth quarter of 2008.
Very weak employment, limited re-financing opportunities and turbulent financial markets have extended into the first months of 2009, while government initiated programs have yet to yield any positive benefits.
To date, national home prices have declined by 27%. Fitch’s revised peak-to-trough expectation is for prices to decline by 36% from the peak price achieved in mid-2006.
The additional 9% decline represents a 12.5% decline from today’s levels. The 36% peak-to-trough decline is up from the forecast 30% decline reported in October 2008. Fitch believes that most of the correction will be incurred in the next two years, with prices exhibiting more stability from late 2010.
Fitch’s revised forecast will be incorporated in all new RMBS analysis, as well as the surveillance of existing Fitch-rated RMBS transactions.
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