Economist Paul Dales says that U.S. home prices are unlikely to rise consistently until 2014, regardless of whether we witness a general economic recovery before then. According to Dales, the low level of demand in the housing market won’t easily be changed by faster employment and income growth. Rising down-payment requirements are scaring off first-time buyers, while the negative equity is making it more difficult for current homeowners to upgrade to more expensive homes (NYSE:IYR).
In fact, if markets begin pushing up, Treasury yields (NYSE:TLT) could send mortgage rates through the roof, which wouldn’t make the prospect of buying a home any more appealing to buyers. And if the economy fails to recover soon, as appears likely to be the case with estimated Q2 GDP down, national debt on the rise, and unemployment remaining high, that would only put more pressure on the already sinking housing market.