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Economist: Plunge in U.S. Home Prices Is Over

Tuesday, 02 Mar 2010 02:52 PM

The drastic drop in U.S. home prices has ended, says James O'Sullivan, chief economist at MF Global.

His outlook for the U.S. housing market is positive, noting that it has been six months since the plunge last May.

“It looks like the big drop is over,” O'Sullivan told Bloomberg TV.

He said there remain risks and headwinds but with low mortgages rates, declining inflation and the lower home prices, he predicts the market “seems to be turning.”

Consumer confidence has also risen while affordability remains high, O'Sullivan said. “I think on balance, the pluses outweigh the minuses,” he said.

While he does not believe that home prices will increase for the near term, a stable outlook for housing in 2010 is “reasonable,” O'Sullivan said.

“I think the big downward pressure is largely over,” he said.

Although U.S. home prices continued to drop late last year, their rate of decline was slower, the Wall Street Journal reported.

The S&P/Case-Shiller home price index dropped by 2.5% in the fourth quarter, compared with the year-earlier period.

“Overall, this report suggests that the recent positive momentum in the U.S. housing market is gaining further traction and underscores that home prices are continuing to stabilize,” Millan Mulraine, a TD Securities analyst, wrote in a note to clients. "As such, we may only be a few months away before we see a monthly gain in national home prices."

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