Moody's Investors Service said yesterday that we should give up dreams of a V-shaped recovery to the housing market. According to Moody's, home prices will continue to decline through 2010 and take at least another 10 years to reach their pre-recession peaks.
"For many reasons, the rebound will be disproportionately small compared to the decline," the company's analysts said this week in its regular analysis of the residential market. "It will take more than a decade to completely recover from the 40 percent peak-to-trough decline in national home prices."
In case that didn't seem bade enough, the news was even worse for the hardest-hit markets like Florida and California which "will only re-gain their pre-bust peak in the early 2030s," according to the Moody's analysts.
While Moody's acknowledges that there have been some positive market indicators in recent months, as home prices and sales have risen significantly in many markets, foreclosures and defaults continue to accelerate. Moody's said it expected that prices "will behave in a much more moderate manner during the recovery."
And despite recent signs of home-price appreciation in the Standard & Poors/Case-Shiller national index, Moody's predicted home prices "will remain at a persistently lower level than we anticipated prior to the crisis, and it will take a full decade from the 2010 bottom just for the national index to climb back to its 2006 peak."
"In general, the length of the downturn and the length of recovery in a region will depend on the degree of aggressive lending or overinvestment in housing that occurred during the boom," said Celia Chen, a senior analyst at Moody's Economy.com. "On the recovery side, states with weaker job growth will also take longer to return to peak."
Even though the recovery will take longer, the market has improved significantly in the DC metro area as first time buyers have reduced available inventory significantly. It seems that prices have begun to stabilize and the freefall is over. It may take 10 years for the market to get back to the '06 levels, but atleast that suggests steady and continued growth.
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