The relentless decline in home prices is nearing an end and prices should rise for the first time in seven years in 2013, but a possible new wave of foreclosures could threaten the recovery, according a Reuters poll of economists.
The median forecast of 24 economists polled by Reuters was for the S&P/Case-Shiller 20-city home price index to end the year unchanged. That was the same finding back in January for this house price gauge, which covers 20 cities.
“We are expecting a gradual improvement, but if we get a big wave of new foreclosures coming to the market, price declines could be even greater,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.
The survey forecast the S&P/Case-Shiller home price index rising 2.0 percent next year, up from 1.5 percent in the January survey.
The housing market’s collapse pushed the economy into its longest and deepest recession since the 1930s. Historically, housing has led the economy out of recession, but it has been the weakest link in the recovery that started in mid-2009.
“The problem with the housing market is not necessarily that mortgages are expensive,” said Millan Mulraine, a senior macro Strategist at TD Securities in New York.
“It’s more the expectation that prices may continue to fall and cause a lot of potential buyers to sit on the sidelines to wait for more attractive entry points. I don’t think there is lot more mileage to be achieved from MBS purchases.”
“This gradual healing is encouraging, but we must tread carefully as the housing market is still far from a robust recovery,” Michelle Meyer, an economist at Bank of America Merrill Lynch in New York.