A new survey conducted for FICO by the Professional Risk Managers’ International Association (PRMIA) revealed some less-than-pleasant news.The hotly anticipated home price recovery seems to be getting further and further away.
Nearly 60% of bankers surveyed by the popular credit score creator expect home prices to stay below peak-2007 levels until at least 2020.
In other words, don’t expect a quick flip – a buy and hold mentality would probably be best here.
And purchasing real estate because you actually want to live in a home would be prudent, as opposed to buying for investment purposes.
An overwhelming 73% of the survey respondents also expect mortgage delinquencies to “remain elevated” for at least another five years.
This would obviously dampen any sign of a recovery, as it would keep the already bloated supply inflated for years to come.
It also means a large number of former owners would be ineligible for home loan financing for some time as well.
Meanwhile, RealtyTrac head honcho Rick Sharga expects a housing price bottom this year, though he referred to it as a “catfish recovery.”
In other words, home prices should finally stop falling at year-end, but remain on the bottom until 2014, at which point they should begin to rise slowly.
Of course, both these predictions are for home prices on a national level, and some areas will certainly improve quicker than others.
So there are likely areas of the country where home prices are depressed enough to support buying as opposed to renting, especially with mortgage rates as low as they are.
In fact, estimates from CoreLogic last year found that many underwater homeowners in Boston and Washington D.C. will have a decent chunk of home equity by 2020 (if they choose to ride it out).
But in hard-hit Detroit, Michigan, the current underwater borrower would still have negative equity of $7,156 by then.
In Vegas, 2020 home equity for current underwater borrowers would rise to $1,039 – not a whole lot to look forward to.
Especially if they could somehow ditch their current property and get in at today’s prices.
If you happen to be a first-time homebuyer, you could actually see some healthy appreciation, and gain some precious home equity.
After all, if current homeowners stick around, you’ll have quite the head start on them.
Just don’t expect the explosive home price appreciation seen in previous decades.