* Things set to get even tougher for distressed home owners?
* House prices set to drop another 5%
* Talk again of a possible double dip
Despite the Case-Shiller index recording a 0.3% month on end improvement during January 2010 leading economists are still arguing for a continued downward trend in the prices of American houses as the economy moves further into 2010. This is in line with educated opinion that the index, which is based on property values in 20 leading cities had been far more likely to move the other way. This means that it is getting even harder for distressed home owners to off-load their properties at break-even. Many are also unemployed, and the consensus is that they are more likely to wait until the axe falls before they vacate.
The same economists are also forecasting that ongoing stagnation in the American property market will team with high unemployment and resultant record foreclosures to further destabilize prices, despite props provided by the $8,000 grants to people buying property for the first time. This is not good news at all for the delicately balanced American housing market. The first round of first time buyer grants have been and gone, largely without producing a blip and in spite of near record low property prices.
US Economist at IHS Global Insight has gone on record to warn home owners to expect a further 5% drop in the near future, because demand is down again since the first round of grants expired. “The housing surplus is close to bad as it ever was” he remarked, “and foreclosures are going to get worse before they get better.”
A drop like this may well convince the unemployed to bail out before things get even worse which could spur yet another bout of underwater selling.
“The only question is how soon before the index reflects a double dip,” agreed Capital Economics Paul Dale. “The real test will be when the second round of tax credits expires around June.”
On a more positive note the Conference Board is reporting marginally improved consumer confidence of 52.5 in March, representing a move from 46.4 in February – but it is still exactly where it was this time last year.