Bank of America Merrill Lynch senior U.S. economist Michelle Meyer appeared on Bloomberg TV to talk about the housing market today, and her outlook wasn’t too bright.
Meyer named tight credit and poor economic conditions for the housing downturn. She then added that she doesn’t expect it to end anytime soon.
In fact, she went on to say that her team’s baseline scenario for housing prices is drop of 8% next year, with the only real growth coming from distressed home sales.
“I think the most effective policy we can see is one that deals with the foreclosure inventory after it’s gone through the process…there’s a lot of homes in the shadows, and an efficient process to clear those homes could really be a win-win with for the market.”
Nor will housing construction pick up the slack for new homes. “The challenge with new home sales is that builders are competing with a lot of the existing properties that are selling at a deep discount. So I actually think that housing demand could pick up next year but most of the demand will be for the distressed properties that are selling at a discount rather than new construction homes.”
Taken together, she says, the housing industry probably won’t turn around for a good two years.
Check out her interview on Bloomberg television: