Future home prices look grim, analysts say

Property values have fallen more than 30 percent in some parts of the country since the housing market collapse, and industry experts continue to debate when they will finally hit bottom.

Property values have fallen more than 30 percent in some parts of the country since the housing market collapse, and industry experts continue to debate when they will finally hit bottom. Some analysts believe this could happen as early as next year before values start to appreciate, but others aren't so optimistic.

Prices could drop an additional 5 to 8 percent between the final quarter of 2013 and the first quarter of 2014, according to a report from Morgan Stanley. This is expected to occur after a prolonged period of stability next year.

Specifically, it's believed that home prices will shift parallel to the Consumer Price Index recorded by the Bureau of Labor Statistics, the report said. This analyzes the average prices paid by urban consumers on general goods and services. Experts believe the more households pay according to the CPI, property values could change accordingly.

An anticipated surge in household formations paired with strict lending standards could also contribute to the rapid decline of property values in the near future. In the past, housing demand helped create economic and real estate stability, but a lack of available lines of credit throughout the mortgage industry will continue to force many families to stay in the rental market. This is expected to have an adverse effect on home prices.

"We are bullish on rental housing," analysts at Morgan Stanley said. "In our view, the incremental demand for shelter will be largely met by rental housing. The homeownership rate, which has sharply declined over the last few years, is unlikely to revert to the highs attained during the middle of the last decade."

Meanwhile, other experts believe consumers remain the key to the housing market's future, according to a report from Fannie Mae. While analysts at Morgan Stanley claim stricter lending standards will hold prospective buyers back from making the transition to homeownership, Fannie Mae chief economist Doug Duncan says that interest rates hovering near all-time lows and affordable property values will continue to provide many options to consumers.

Real estate data indicates the home sales rate is already 8 percent higher this year than it was at the same time in 2011, and this trend is expected to continue as the market enters its peak season for activity.



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