Housing Prices To Free Fall in 2008

In keeping with our promise not to water down reality in what we cover for you at this site, we bring you news of a Merrill Lynch report released recently that said "The worse housing financial crisis in decades is only going to get worse."

The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.

By contrast however, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008.  NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record.  But NAR sees an uptick in home prices in the last two quarters of 2008.

The current housing crisis and the depreciation in home prices have pummeled the economy, with businesses and consumers cutting back on spending, raising the specter of a recession.

But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP.

Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 – a historic low.

We’d love to hear your comments and thoughts on the current market.  And what about the Fed rate cuts?  Do you think it will help stimulate the economy and the housing industry?  Leave us your comment below.  Your email address will not be published here for your privacy.