Jul
07

Economists See Slow Recovery to Housing Industry

July 07, 2011

Are you in the market to buy Chicago real estate but have been holding off to get the best possible price? According to economic experts, you can keep waiting.

CNNMoney surveyed 27 economists on the state of the U.S. housing market, and the concensus was that housing prices will probably keep falling for the rest of this year and will most likely not improve much next year either.

Most of the economists predicted a median decline of 2.9 percent in home prices in 2011 compared to the previous year.

Several of them believe home values must fall even more before a recovery really takes hold and predict a 4-6 percent drop in home prices this year.

Three optimists expect home prices to rise this year.

home with a reduced price outsideAs for next year, the median guess is a 2 percent increase in home prices, though six of the economists forecast home values dropping again in 2012.

Besides home prices truly bottoming out, the economists believe two things must happen to spur a housing recovery: The labor market must see a significant improvement, and the inventory of foreclosed homes must be lessened.

Want to see all the economist’s opinions? Click here.

Meanwhile, just because you are waiting for lower home prices doesn’t mean that interest rates are going to wait for you.

According to Freddie Mac, fixed-rate mortgages rose this week by the more than they have in four months.

The 30-year fixed-rate mortgage averaged 4.60 percent for the week ending July 7. That’s an increase from 4.51 percent last week. This week’s rate is higher than it was a year ago at this time when it averaged 4.57 percent.

The 15-year FRM averaged 3.75 this week, up from last week’s 3.69 average. This rate is still lower than it was at this time last year when it averaged 4.07 percent.

Even though they are on the rise, these rates are still low by all standards. Home buyers might still want to hold out for the right deal, but homeowners who haven’t should be refinancing their existing mortgage.

“Mortgage rates . . . remain quite affordable by historical standards,” said Frank Nothaft, vice president and chief economist for Freddie Mac.

“For instance, interest rates on all mortgages outstanding in the first quarter of this year averaged just under 6 percent. With today’s rates, these homeowners who have the ability to refinance could shave $169 per month in interest payments on a $200,000, 30-year fixed mortgage.”

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