Forecast: Drops in Home Values Less Severe in 2012

The Wall Street Journal

9 February  2012

It will be a year of not-as-bad numbers for home values.

Zillow’s home-value forecast released on Thursday predicts a drop of 3.7% this year, which only looks like an improvement when measured against the 4.7% drop in 2011. Some markets hammered by the housing bust, such as Phoenix, Los Angeles and Riverside, Calif., should bottom out for home values in 2012, according to Zillow, and might even see a slight increase in values.

But other markets, particularly Atlanta, Chicago, and Seattle, are projected to show significant further home-value declines on a year-over-year basis in December 2012. The forecast from the real-estate company covers the top 25 metro markets.

Of course, a forecast is just that, and unforeseen factors could change the housing market’s course.

While prices will drop, total home sales are expected to continue to pick up this year amid affordable prices and low mortgage rates, factors that draw in second-home buyers and investors. It also seems that a shrinking inventory of homes for sale might prove to be an advantage for sellers.

But finding bright spots in this housing market can seem like a futile effort since values have fallen, nationally, 24.2% from the peak and foreclosures remain a huge obstacle blocking any potential rebound. CoreLogic reported Wednesday that, in December, 1.4 million homes, or 3.4% of all homes with a mortgage, were in the foreclosure inventory.