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Article by: Carrie Bay on 10/12/2010

Economists Say Home Prices Have Already Hit Bottom

Home prices in the United States found their floor during the early part of 2010 and are expected to begin trending upward next year, according to a panel of elite economists surveyed by the National Association for Business Economics (NABE) for its October 2010 Outlook.

“The housing recovery is intact, but tepid overall. Home prices have hit bottom,” NABE stated in its report outlining the survey results.

The panel anticipated a 1.5 percent drop in residential home values this year, and that decline has already been registered through the first half of 2010, NABE explained.

The group of economists is projecting gains in home prices of 1.2 percent over the course of 2011, but they warn that the modest increase will not keep up with the broader measures of inflation.

NABE panelists expect any evidence of price weakness post-tax incentive to be temporary. Their assessments of the importance of the government’s recent stimulus measures in the form of tax breaks for homebuyers vary widely. Nearly one-third feel that a persistent relapse will follow the incentives’ expiration, while the remaining two-thirds believe an underlying recovery is in place.

When it comes to the distressed side of the business, it’s become clear that the nation’s high level of unemployment is now one of the primary triggers of default among struggling homeowners. Getting more people back to work is key to a recovery in housing and getting a handle on still-rising delinquency numbers. But NABE’s panel warns that labor market conditions will be slow to improve.

The economists are forecasting monthly payroll gains to average 150,000 or less until the latter half of 2011, at which time gains will improve to a range of 170,000 to 175,000. The unemployment rate is expected to persist at over 9.5 percent through midyear 2011, before easing only slightly to 9.2 percent by the end of next year.

“This will mark the worst post-recession job recovery on record,” NABE said.

NABE panelists trimmed their projections on overall economic growth. Those projections now remain sub-par through year-end, the organization explained.

“This summer’s slowdown has exposed the economy’s sensitivity to wealth losses, the unwinding of debt, and the reductions in economic stimulus,” said Richard Wobbekind, NABE president-elect and associate dean of the Leeds School of Business at the University of Colorado-Boulder. “Confidence in the expansion’s durability is intact, but recent economic weakness has prompted many panelists to scale back expectations for the year ahead.”

The October 2010 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 46 professional analysts. The group included economists from such firms as Moody’s Analytics, the PMI Group, Fannie Mae, and Goldman Sachs.