AUSTIN, Texas – The housing market won’t hit bottom until the third quarter and a true turnaround in new home-building is not foreseen until 2013, key economists said today.
“The bottom will be long and flat,” said Stan Humphries, chief economist for Zillow.com, at the Austin Hilton during the National Association of Real Estate Editors conference.
Home prices are not expected to appreciate for the next three to five years, he said.
Humphries said the market cannot repair itself quickly because of the large inventory of houses on the market, the large amount of shadow inventory, underwater properties and high unemployment. Zillow defines shadow inventory as those homes in foreclosure plus those mortgages more than 30 days’ delinquent.
“That combination puts acute financial stress on households,” he said.
And Douglas Duncan, chief economist for Fannie Mae, expects the home-building industry to be tested until early 2013 before demand will catch up with the large supply of houses on the market. He said the combination of current inventory of unsold homes plus the foreclosures not yet for sale has elevated supply by roughly 2 million houses over normal levels.
He said housing starts would be below normal levels until that inventory is absorbed.
Metro Detroit ranks among the nation’s largest metro areas that may see some improvement and then get worse, according to Zillow data. Home values in metro Detroit were 46% below their peak in March.
Zillow counts 7.3 million mortgages that were either in foreclosure or delinquent as of March 2010 and defines that as shadow inventory. That figure is not now being counted in the supply of homes on the market. When adding that to current inventory, supply is 45% higher than official tallies, Humphries said.
Contact GRETA GUEST: 313-223-4192 or gguest@freepress.com.