Experts say market is stabilizing

A number of the industry’s closely watched home-price gauges indicate that stabilization has been slowly creeping into the picture since mid-2009. Analysts at Barclays Capital agree that the tail risk of a sharp decline in housing continues to recede with every passing month. But they caution that there’s still a bit more of a drop in the cards and little chance of sustained gains any time soon thanks to an inflated supply of foreclosures.

Barclays predicts that home prices nationally will drop another 4 to 5 percent before officially hitting bottom. The firm called this further decline “limited” because lately new foreclosure growth has been curbed, which means these properties can be more easily absorbed by the market without pressuring prices down. Mortgage modification programs and other policy measures have ensured that the millions of foreclosures yet to hit the market will do so over an extended period of a few years instead of a few quarters, Barclays said, noting that this smoothed-out supply should limit any future decline in home prices.

Barclays says the stability we’ve been seeing in home prices has been a direct result of slowing down the supply of foreclosures. But the company’s analysts warn that stability in the present comes at a cost to the future of home price appreciation. Barclays expects home prices to remain disproportionately low without any form of a notable rebound for years to come.

Source: Real Trends

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