The U.S. housing market will take three to four years to stabilize and absorb an estimated seven million homes that are vacant or in the process of foreclosure, said Douglas Duncan, Fannie Mae’s chief economist.
The excess inventory has driven down demand for new homes and will keep prices on a “flat bottom,” Duncan said in an interview today on Bloomberg Radio’s “The Hays Advantage.”
“To get back to a more normal relationship with overall economic growth, we see 2013 or 2014,” he said.
Fannie Mae, the largest U.S. mortgage finance company, expects sales of 4.7 million existing homes this year, down from 5.2 million last year, according to Duncan. Demand for new homes, which fell to a record low annual sales pace of 276,000 in July, won’t return to its historical annual rate of 1.3 million to 1.4 million until the market clears the excess inventory and consumer confidence returns, he said.
States such as California, Nevada, Arizona and Florida will take longer to recover because homes built during the housing bubble exceeded population growth and investor demand, he said.