Economist: U.S. Housing Market May Hit Bottom in 2009

U.S. home prices will reach bottom by the end of the year, concluding a slide that will have cut values 36 percent, Moody’s Economy.com said Monday.

“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”

Demand for new and existing homes began to fall in 2005, marking the end of a five-year U.S. housing boom fueled in part by easy credit for subprime borrowers. Existing home prices tumbled from an average high of $230,200 in July 2006 to $175,400 in December, according to data from the Chicago-based National Association of Realtors.

U.S. home prices will fall another 11 percent on average before stabilizing, according to Moody’s Economy.com. The Case-Shiller home price index will fall 36 percent from its 2006 peak to the bottom this year, Zandi’s study said.

About 62 percent of U.S. metropolitan areas surveyed will record double-digit declines in home prices by the end of the slump, according to today’s report. Prices will fall more than 50 percent in former boom areas such as southeast Florida and parts of California, including Riverside.

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