U.S. housing recovery depends on foreclosure processing, mortgage rates

April 12, 2012 02:15PM

Home prices nationwide are finally bottoming out, though foreclosures threaten the market’s strength, Reuters reported. Reuters’ survey of 24 economists forecast the Case-Shiller Home Price Index rising 2 percent next year, up 0.5 percent from the 1.5 percent growth projected in the news agency’s January survey.

Traditionally, housing leads the American economy out of a dip, Reuters said. However, this recession has proved different, likely because home prices have “an oversized reach,” in the current economy, the survey shows. Home prices fallen approximately 32 percent from their peak, at the end of 2005, Reuters said. And an estimated 11 million Americans are underwater on their mortgages.

“We are expecting a gradual improvement, but if we get a big wave of new foreclosures coming to the market, price declines could be even greater,” Yelena Shulyatyeva, an economist at BNP Paribas in New York, who was consulted in the survey, told Reuters. The economists found that Americans’ expectation that more foreclosed homes would still be flooding the market was causing them to delay purchasing a home.

The economists also said that the purchase of additional mortgage-backed securities by the government might help keep mortgage rates at their historic lows, which could be key to spurring a housing recovery. [Reuters]