Moody's Predicts 10 Years for a Full Home-Price Recovery
By: Adam Weinstein
Moody’s Investors Service denied optimists their dream of a V-shaped recovery to the housing market, insisting that home prices would continue to decline through 2010 and take at least another 10 years to reach their pre-recession peaks. “For many reasons, the rebound will be disproportionately small compared to the decline,” the company’s analysts said this week in its regular analysis of the residential market. “It will take more than a decade to completely recover from the 40 percent peak-to-trough decline in national home prices.” Worse still, the hardest-hit markets like Florida and California “will only re-gain their pre-bust peak in the early 2030s,” according to the Moody’s analysts. The bursting of the housing bubble in the middle of this decade “precipitated a crisis in financial markets the likes of which have not been seen since the Great Depression and plummeted the nation into recession,” Moody’s said. The damage from that downturn, the company added, would likely “be long lasting and persist in nearly all facets of the housing industry, including the demand for homes, ownership patterns, homebuilding, and house price appreciation.” Market indicators have been mixed in recent months, as home prices and sales have risen significantly in many markets, but foreclosures and defaults continue to accelerate.
Moody’s said it expected that prices “will behave in a much more moderate manner during the recovery.” And despite recent signs of home-price appreciation in the Standard & Poors/Case-Shiller national index, Moody’s predicted home prices “will remain at a persistently lower level than we anticipated prior to the crisis, and it will take a full decade from the 2010 bottom just for the national index to climb back to its 2006 peak.” Those predictions, however, did not apply to the biggest boom-and-bust states in the country, Moody’s said â€” hence the dire predictions for Florida and California, as well as New York, where the Wall Street financial-market bloodbath would take a continued toll on the local housing market. “In general, the length of the downturn and the length of recovery in a region will depend on the degree of aggressive lending or overinvestment in housing that occurred during the boom,” said Celia Chen, a senior analyst at Moody’s Economy.com. “On the recovery side, states with weaker job growth will also take longer to return to peak.”
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