US home prices are expected to take years to recover, and will likely continue declining through 2010, despite posting a slight gain in the first quarter of the year. Housing prices in Nevada, Arizona and Florida are expected to post double-digit declines from Q1 of this year through Q1 of 2011. See the following article from HousingWire for more on this.
Fiserv (FISV: 49.26 +0.78%), financial services technology provider, found that national average house prices rose 2% in Q110 from a year before — the first yearly gain since 2006.
The overall increase is driven by a few local markets, however, and prices look to continue to fall overall in the year to come.
Fiserv projects that single-family house prices are likely to fall another 4.9% over the next 12 months as tight economic circumstances continue. Continued high unemployment and a large number of distressed properties remaining in markets like Florida, Arizona and Nevada are weighing on the housing market.
Steep house price declines are anticipated to continue in hardest-hit markets. For example, average prices in Nevada, Arizona and Florida are expected to fall 11.1%, 10.8% and 8.8%, respectively, from Q110 to Q111.
“The stabilization of residential real estate markets will take many years as buyers and sellers try to find price levels that clear large inventories of vacant homes from the market,” said Fiserv chief economist David Stiff. “Consequently, we expect to see prices bounce up and down around their lows for the next two to three years, especially in markets that experienced the largest home prices bubbles.”
Stiff added: “This will result in alternating bouts of optimism and pessimism regarding the housing market recovery, similar to what we have seen for the economy as a whole. This will make it difficult to know exactly when the housing market has reached its bottom.”
The projections are based on the Fiserv Case-Shiller Indexes, which found that single-family house prices rose an average 2% in Q110 over the previous-year quarter. It marked the first yearly gain since 2006.
Strong price increases in markets like the San Francisco Bay Area and Washington DC drove the overall increase. On a local basis, however, prices were down in 303 of the 384 metro areas studied for the index.
The largest yearly gains in house prices occurred in lower-priced segments of metro markets — which Fiserv said indicated the recent rebound in prices can be traced to the first-time homebuyer tax credit’s effect on demand.
“Although part of the rebound in the less expensive market segment is due to improving affordability, it is likely the rising sales volumes and prices of low-priced homes were mostly due to the tax credit,” Stiff said. “When the tax credit expires, sales activity for low-priced homes will drop causing a moderate decline in overall home prices.”
Stiff previously noted that buyer optimism likely drove gains in 40% of the metros in Q409.
The latest Standard & Poor’s (S&P)/Case-Shiller House Price Index (HPI) found that house prices in 20 major metropolitan areas rose 1.3% in May from April and 4.6% from a year earlier.
This article has been republished from HousingWire. You can also view this article at HousingWire, a mortgage and real estate news site.