The slump in housing prices isn’t over, and the implications of that weakness for the economy aren’t good, experts say.
A new survey conducted for MacroMarkets, a financial-markets product creator co-founded by housing expert Robert Shiller, that polled more than 100 economists shows abundant pessimism, The Wall Street Journal reports.
Their consensus is that home prices will fall 2.5 percent this year and gain just 1.1 percent annually through 2015.
"With all of the economic turmoil, both domestic and international, there's not much that points to an improving housing market at any point in the near future," Ara Hovnanian, chief executive of homebuilder Hovnanian Enterprises, tells The Journal.
That would mean continued weakness for consumer spending. Falling house prices dampen spending because they make homeowners feel less wealthy. About 20 percent of homeowners have a mortgage worth more than their homes.
The economy is the ultimate victim. The bad debt is "dragging the nation's economy underwater," Lewis Ranieri, who helped create the mortgage-bond market, said in a recent speech.
As for Shiller, the Yale University economist suggests that the Federal Reserve’s new “Operation Twist” won’t have much impact on housing.
“Homeowners are relatively insensitive to mortgage rates when they are lacking confidence,” he tells Bloomberg. “The dramatic thing that is happening now is that their job isn’t secure, if they even have one.”
Mortgage rates already have dropped to 60-year lows without boosting the home market much.
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