Home Prices in 2011 Will Depend on Local REO Inventories

November 28, 2010 (Chris Moore)
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In a report issued by Moody’s Analytics, home prices nationally are expected to continue to decline through the first half of 2011 but the severity of the declines will most likely be dictated by the amount of real estate owned (REO) properties in the affected local market.

The report forecasts that markets that are experiencing higher levels of REO’s and foreclosures will experience greater declines in home prices. Areas expected to experience the largest declines are Las Vegas, Fort Lauderdale, and Riverside, California.

Markets like Austin, Texas and Albany, New York should experience less severe declines because those markets have fewer REO properties, foreclosures, and their housing markets are more stable.

Celia Chen, a Moody’s Analytics senior director stated, “The housing market is having a tough time shaking off its malaise, and a true recovery is another six to 12 months away. The impact of the still-high national REO inventory and continued slow economic growth won’t let up on housing until the second half of 2011.”

The national inventory is expected to peak in 2011 at approximately 971,000, 16 percent above 2010 projections. Nationally, the total visible and shadow inventory currently stands at 6.3 million units resulting in a 23 month supply of available properties.

Moody’s based it’s analysis on foreclosure data from RealtyTrac and the Case-Schiller Home Price Index.

Tags: REO, local market, foreclosures, REO properties, REO inventory, housing market, economic growth, shadow inventory