A Fiserv analysis of home price historical trend data and forecasts for more than 375 U.S. markets based on data from the Case-Shiller indices, Federal Housing Finance Agency (FHFA) House Price Index and Moody's Economy.com, indicates the markets that experienced the greatest price bubble won't see home prices return to peak levels until 2025 or later, the company said Thursday.
The company also forecast another 7% drop in home prices in 2010, with a "prolonged recovery beginning in early 2011." It attributed increased sales in late 2009 to "lower prices, almost record-low mortgage interest rates, and the $8,000 tax credit for first-time home buyers" ... and "financial institutions' inability to effectively sell homes with distressed mortgages."
"We see several powerful forces in the market that will severely hinder the housing recoveries of many metro areas, particularly in the hard-hit states of California, Florida, Arizona and Nevada," said David Stiff, chief economist at Fiserv. "It will take these markets 15 or more years before home prices climb back to their peaks."
The outlook is not much better in the industrial Midwest, where Fiserv said permanent job losses have reduced housing demand to a point at which it will take at least five years, perhaps more than 10 in some markets, for home prices to get back to where they were at market peak in the mid 2000s. It cited Michigan, Indiana and Ohio as states with such markets.
"The picture is not uniformly grim," Stiff continued. "In fact, our analysis projects that some markets are poised for a relatively fast recovery, including some areas that never experienced large declines in prices. Markets that could see prices come back within the next few years include Pittsburgh, Pennsylvania; Columbia, South Carolina and several metro areas in Texas, Washington and upstate New York."
According to the Fiserv report on the survey, Orlando, which peaked in the econd quarter of 2006, will have seen prices fall 59.9% when the market reaches a trough in the second quarter of 2011. It projects home prices will not return to peak levels until "after 2039." Likewise, Sacramento, which peaked in the fourth quarter of 2005 and is bottoming in the second quarter of this year, won't see peak prices again until then.
Among other cities, Fiserv predicts Jacksonville will bottom with losses of 39.3% in the second quarter of next year, with peak prices not returning until the second quarter of 2020. San Jose will see losses of 41.7% when it bottoms in this eyar's fourth quarter and won't fully rebound until 2023. Tucson will hit bottom at yeaend 2010 as well, but prices will have fallen 38.8% and won't recover until 2020. Baltimore also will hit a yearend trough with losses of 21.6%, but it will be back sooner--in 2016.
On the other hand, San Antonio will be back by the fourth quarter of 2012 having experienced only a 2.4% drop from peak. Louisville also wil be back by then with a loss of ohnly 2.3%. Ft. Worth, Indianapolis, Kansas City and Raleigh, all with losses in home prices under 10%, will be back to peak levels by the end of 2013. So will Philadelphia, which will have erased a 10.2% decline in home prices by the first quarter of that year.
The report did not include data for the nation's 20 largest markets, for which Standard & Poor's has exclusive license from MacroMarkets LLC, which owns the Case-Shiller series. Fiserv has rights to Case-Shiller data for markets from No. 21 down.