Market Bottom for Home Prices Continues Elude Owners

Earlier this week some analysts were hinting strongly or even saying outright that the housing market has finally hit bottom, a sign that could herald a comeback. That market is bifurcated into the market for new homes and housing starts, and the other part for home prices. On Thursday a release by Zillow Real Estate Market Reports seems to contradict the hopes of many that prices for homes have finally reached their lowpoint.

According to Zillow, ‘…home values decreased 1.1 percent from the third to the fourth quarter of 2011 to $146,900. On an annual basis, this represents a 4.7 percent decline’. The report goes on to say that, ‘…we maintain our forecast that home values will continue to fall in 2012…with a 3.7 percent decline through December 2012’.

However, the same report forecasts that home sales should increase during 2012, in part due to prices falling even more. Also, it is believed that some regional markets may see price increases, though the national average price will still fall, and it is hoped that this development signals that 2102 ‘will be a transitional year’ in housing.

It’s fairly well established that home price trends lag the new homes and starts market, so the forecast of a transitional year could be accurate. But having new homes and starts increasing while prices are still falling puts current homeowners in a bind: if they want to sell, do they wait on higher prices, while knowing that the sales market could slump? Or, do they take a price lower than they want, to take advantage of the positive sales situation? If the latter is chosen, it will reinforce the trend towards lower prices, bringing the average price down, or not allowing it to rise.

Also, the actual forecast of prices continuing to fall throughout the year could significantly affect the market. If investors are told that a certain stock price will fall for many more months, will they buy it now? This situation could separate home buyers from home investors: people who want or need to buy a house now, might go ahead and purchase, but the investors will likely wait, and that could depress the sales market if investors are predominate. It appears that finding the bottom of the housing market remains elusive, and the reasons are complicated.

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