Home Price Declines Forecasted Through 2009

How long will your house keep losing value? Depending on where you live, home prices could continue to decline for the next two years, says PMI Group Inc., chief economist David Berson.

Â“There are a chunk of cities where the risk that prices will be lower two years from now is pretty high,Â’Â’ says Mr. Berson, whose latest report forecasts the risk of home price declines through the end of 2009. (See full report.)

As you might expect, the cities at the highest risk are those where home prices rose the fastest during the boom: Riverside, Calif., Las Vegas, Orlando, Ft. Lauderdale and Phoenix.

In the fourth quarter, home prices across much of the U.S. fell 8.9% from a year earlier, according to S&P/Case-Shiller. Mr. Berson is expecting the S&P/Case-Shiller index could fall another 15-25% before the market fully recovers.

Although sales and new home construction may rebound before the end of 2009, prices could remain under pressure because of the glut of home and foreclosed properties on the market. –Michael Corkery