Home price declines may continue through 2009 and bottom-out at the end of the year at the earliest, although recovery may not begin until mid-2010 and will take several years, according to one economist that spoke at an outlook panel at the American Securitization Forum taking place this week in Las Vegas. Mark Fleming, chief economist First American CoreLogic, said that in the most optimistic scenario, if the government stimulus took effect today and put the complete brakes on home price decline, the market would still need roughly a year at the very least to display any kind of recovery in home value.
“We’ll have to work our way out,” Fleming said. “Home prices are not like Lamborghinis; they don’t stop on a dime. They’re more like trucks.”
Within the same panel, a senior economist at Barclays Capital Inc., Julia Coronado, echoed Fleming’s home price decline forecast, saying prices will not stabilize until well into 2010. As a reaction to the continued pressure on home prices, households will demonstrate a change in spending while the household savings rate will quickly rise and reach into 5.6 percent in 2010, she said.
“We don’t predict another asset bubble to come to the rescue,” Coronado said. “Too much damage has been done to the financial sector…. We’ll have to get out of this the old-fashioned way, by digging our way out — or saving our way out.”