Foreclosed housing inventories will reach their highest levels in the third and fourth quarter next year, according to Michelle Meyer, a top economist at New York-based Barclays Capital.
Meyer predicted that sales of foreclosed houses and other pre-owned homes will increase next year to 5.41 million, compared to the 4.75 million foreclosed housing units expected to be sold this year.
She also predicted that sales of newly-constructed homes will jump to 440,000 in 2010, compared to the 350,000 units expected to be sold this year.
The economist based her forecasts on various data related to the recession, unemployment rates, consumer confidence and other financial data.
Meyer’s new-home sales forecast of 440,000 for 2009 would make this year the lowest in sales of newly-built homes since 1963, based on Census Bureau data.
In the meantime, economist Lawrence Yun predicted that foreclosed housing units this year will reach 2.5 million units.
In May, sales of pre-owned homes and foreclosed housing units increased by 2.4 percent to 4.77 million on an annualized basis, which was lower than the predicted figure. The median home price declined by nearly 17 percent compared to May 2008.
Meyer also predicted that home prices will drop by 40 percent in the third and fourth quarter next year. She explained that despite federal and state foreclosure prevention programs launched this year, foreclosure inventories will continue to grow and house prices will continue their downward slide, although at a slower rate than the pace in previous months.
Home prices may fall by another 7 percent, Meyer added, based on the home price decline index released by Standard & Poor’s Corp. this week. The S&P/Case-Shiller 20-City Home Price Index showed a drop of more than 18 percent in April on a year-over-year basis. S&P has been tracking the prices of single-family houses in 20 of the nation’s large metro areas since 1987.
The Standard & Poor report said that the three-year foreclosed housing problem has clipped nationwide home prices by about 33 percent since July 2006 when house prices were at their highest levels.
In many markets, foreclosed housing inventories are not being significantly reduced because prospective home buyers are being hindered by the rising mortgage rates, poor credit and lack of financing.
According to a group of real estate analysts and brokers, it would take nearly ten months to sell all unsold foreclosed housing units and other unsold homes based on the current pace of home sales.
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