Fiserv Outlook: Home Prices To Decline Slightly Until Second Half 2012

Fiserv, a financial services technology company that generates the Case Shiller Home Price Index, released their Home Price Insights yesterday. In a nutshell the release had two main points:

  • They are forecasting that home prices, at a national level, will fall 3.6% during the year ending in mid-2012 and will then rebound by 2.4% over the next year. Basically, that’s flat.
  • They point out that home affordability is the lowest on record as measured by the ratio of median mortgage payments to median family income. In fact mortgage payments on a median priced home are now 40% lower than they were at the peak.

In discussing their home price forecast, David Stiff, chief economist at Fiserv, made the following argument:

If economic growth picks up in the second half of 2011, then home prices should stabilize early next year. New housing construction is at an all-time low and inventories of foreclosed properties are starting to shrink. Lower levels of housing supply and more steady demand next year will reduce downward pressure on prices. As homebuyers become more confident, many who are sitting on the sidelines will begin to enter the market and prices will start to increase. But we should not expect a rapid rebound in home prices. Very large inventories of foreclosed properties must be liquidated and absorbed before the healthy functioning of housing markets is restored.
Potential buyers must be convinced that the economic recovery is back on track and that the double-dip in home prices is nearly over before housing demand will begin to rise.

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