Housing Prices Expected to Keep Falling

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Following a year of sharp price declines in the housing industry and rising foreclosures, analysts warn not to look for a quick turnaround in 2008. Many forecasters had been expecting the worst to be over by now. But it appears the housing bust will last at least another year.

RENEE MONTAGNE, host:

You can bet real estate agents are - weren't throwing confetti or tooting their horns to celebrate 2008 - lots of homes remain on the market. And this coming year, prices in most areas are expected to keep falling.

NPR's Chris Arnold reports.

CHRIS ARNOLD: Sales are still basically at their lowest point in 10 years. The latest monthly data from the National Association of Realtor shows that median home prices are down 9 percent since their peak in the summer of '06.

Looking ahead, Mark Zandi heads up Moody's Economy.com.

Mr. MARK ZANDI (Chief Economist, Moody's Economy.com): Certainly another tough year, particularly the first half of the year. I think home sales will continue to fall of, constructional decline, and we've got a lot more house price declines to come.

ARNOLD: How steep a decline depends on where you are. There are cities and towns in states like Florida and Nevada that saw huge price increases and lots of overbuilding during the boom. So forecasters say in those places, prices will plunge 20 or 30 percent or more from their peaks. Other areas will see more modest declines. And on the bright side, Zandi says, a third of the nation's metropolitan areas will hold up better in the coming year, some may even see slight price gains. But the huge supply of unsold homes out there, will on average, keep things slumped.

Mr. ZANDI: The housing market's awash in unsold inventory and that's fundamentally the most significant weight on the market. Not until we start to see these inventories come down will the market begin to stabilize. And I think inventories are likely to rise more before they begin to fall this spring.

ARNOLD: Meanwhile, the ongoing foreclosure crisis is putting hundreds of thousands of more homes on the market so the coming year is likely to see further cuts in home construction and layoffs in related industries. And many economists think it will be 2009 before prices recover nationally.

Chris Arnold, NPR News, Boston.

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