Housing prices to drop in 2007
the first home price drop for an entire year since the 1930's
Housing prices to drop in 2007
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But Mid-South likely to see small increases
By From Staff and Wire Reports
October 4, 2006
WASHINGTON -- Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation's metropolitan areas, with the Northeast, Florida and California among the areas hardest hit.
But the Mid-South is in an area where local and national experts expect home prices to show modest increases over the next few years.
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Moody's Economy.com, a private research firm based in West Chester, Pa., projects the median sales price for an existing home to decline in 2007 by 3.6 percent -- the first home price drop for an entire year since the 1930s.
The forecast is in a 195-page report, "Housing at the Tipping Point," which The Associated Press obtained before its release on Wednesday.
The report projected 133 of the nation's 379 metro areas would see price declines, covering nearly half the value of the nation's single-family homes.
Price declines contrast with the past five years when low mortgage rates set annual sales records, and prices soared. Some analysts worry the slowdown could drag the nation into recession.
A National Association of Realtors analysis of the Memphis market says locals' excessive use of subprime mortgages is troubling, but recent job growth, in-migration and home building cuts tend to support area home prices. And the Mid-South has not had much speculative housing spending, as occurred on the coasts, experts said.
Memphis-area home prices rose just 10.8 percent over the three years ending June 30, as the national average rose 31 percent, the NAR report says.
The Economy.com report said the biggest percentage price drop will be in Danville, Ill., where prices have already fallen by 18.7 percent, spurred by layoffs in autos and other manufacturing industries.
The price-drop areas are in California, Florida, the Northeast from southern Maine to just south of Washington, D.C., plus Nevada and Arizona areas and some depressed Midwest markets, such as Detroit. "Prices are going to go down and stay down for awhile," said Mark Zandi, Moody's Economy.com chief economist.
The Economy.com report said Texas, the Southeastern states other than Florida and much of the Midwest should not have declines, but price hikes are likely to be modest.
The report described the current environment as a "correction" and not a "crash."
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