Posted on Friday, 22nd April 2011 by Charlotte W
Some further declines in home prices are expected this year before the housing market finally stabilizes, according to the latest economic analysis and forecast from Fannie Mae.
Shocks to the economy caused by rising oil prices linked to unrest in the Middle East and manufacturing disruptions caused by the Japanese tsunami have damped expectations for an economic recovery in the first half of the year, according to the forecast, although those impacts are expected to be temporary. As a result, Fannie Mae analysts have rolled back their predictions for U.S. economic growth to 3.1 percent for 2011, down from 3.5 percent previously, although they still expect a quickening pace of growth in the latter part of the year. Weakening home prices could discourage potential buyers, according to the report, which threatens to undermine any recovery in the struggling housing market. Prices appear to be declining more than expected, according to Fannie Mae Chief Economist Doug Duncan, but are still forecast to stabilize later this year. Home sales were sluggish in the first part of the year, with sales of distressed properties making up a third of all purchases. The increasing level of distressed sales was cited as a key factor in declining home prices, along with reductions in government programs designed to support the housing market. On the other hand, the report notes that employment figures are looking more promising, with at least 230,000 private sector jobs added in each of the past two months. Duncan said that if employment continues to improve, as expected, it should help to boost the housing market as well, hopefully by the latter part of this year.
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Tags: Declines, Home Price
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