Goldman Sachs analysts think home prices will resume their decline as government stimulus measures wane.
“The risk of renewed home price declines remains significant,” Alec Phillips, a Goldman economist, wrote in a note to clients. “Our working assumption is a further 5 percent to 10 percent decline by mid-2010.”
The home market has been buoyed by government measures, such as the $8,000 first-time buyer tax credit, foreclosure halts and Federal Reserve purchases of mortgage-backed securities.
Senators this week announced a plan to extend the credit to April and to expand it, allowing current homeowners to take the credit, and raising the maximum income limits.
Goldman calculates that the steps have cut the number of foreclosures by about 450,000 and have sparked sales by around 200,000 homes.
“Taken together, these moves might have added 5 percent to home prices nationally,” Phillips wrote.
“If this estimate is correct, it suggests that most of the increase in home prices since this spring, which has totaled between 2 percent and 4 percent in seasonally adjusted terms, has been due to temporary factors.”
The latest figures from the S&P/Case-Shiller index of 20 U.S. cities show home prices gained 1 percent in August from July, the third straight rise. And though the index was down 11.3 percent from a year earlier, that was the smallest 12-month drop since January 2008.
Karl Case, the Wellesley professor who co-created the index, is more optimistic than Goldman.
“Housing is as affordable as it’s been in 20 years,” he told The New York Times. “I don’t see a very rapid recovery, but I think we’ve seen the bottom.”
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