New York, Orange County leading drop as higher unemployment offsets lower prices
(CHICAGO) US home prices may fall another 14 per cent, led by the New York and Orange County, California, metropolitan areas, before reaching a bottom as an increase in unemployment offsets lower prices, Deutsche Bank AG said.
'Affordability is no longer the driving issue in the housing market, and we believe prices still have a ways to fall in many areas before home prices reach their trough,' Deutsche Bank analysts led by Karen Weaver, wrote in a report yesterday. 'The bottom is getting closer, but we are not there yet.'
Home prices are forecast to fall 41.7 per cent from their peak, Ms Weaver said.
That's higher than a forecast she released in March and reflects 'the actual declines to date and the expected future impact on home prices from rising foreclosure inventory and unemployment'.
In March, Deutsche Bank had forecast a 16.5 per cent decline in 'current-to-trough' prices. While today's projection is less than that, many metropolitan areas will still see steep declines, the report said.
In the New York metropolitan area, they may drop 40.6 per cent from the first quarter to the bottom, the report said, less than Deutsche Bank's March estimate of 47.4 per cent.
Financial firms have cut more than 183,000 jobs in the Americas in the global credit crisis, driving down prices and rents in the New York area.
In New York City, Manhattan co-op prices slid the most since 1995 in the first quarter, according to data from Miller Samuel Inc and broker Prudential Douglas Elliman Real Estate.
The New York metropolitan area's median home price peaked in the second quarter of 2007 at US$552,000 and has since fallen to US$446,000, the report said.
Home prices in Orange County, California, are forecast to fall another 19.1 per cent, Deutsche Bank said.
Prices in the Los Angeles- Long Beach-Glendale metropolitan area may fall another 11.3 per cent from the first quarter to the bottom. In Riverside-San Bernardino-Ontario, they may fall 14.3 per cent.
California leads the nation in foreclosures. US foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million in the first half of the year, RealtyTrac Inc said in a June 11 report.
The US unemployment rate will likely exceed 10 per cent by early next year, Deutsche Bank said. -- Bloomberg
Source: Business Times, 18 June 2009