U.S. housing prices may climb 5 percent in six months as the economy avoids falling into another recession, according to John Silvia, chief economist at Wells Fargo & Co. in Charlotte, North Carolina.
“It’s more likely to be the positive 5 percent in another three to six months, once we get through a lot of this political uncertainty and we have an understanding of where the economy is going,” Silvia, 62, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “The economy has legs, it’s going to go forward, it’s not going to be a double dip.”
U.S. home prices fell 3.3 percent in July from a year earlier in an eighth consecutive decrease as foreclosed properties flooded the market, the Federal Housing Finance Agency in Washington said yesterday. Prices slid 0.5 percent from June, compared with a 0.2 percent drop that was the median forecast of 15 economists in a Bloomberg News survey.
A distressed housing market was one of the reasons the Federal Reserve cited on Sept. 21 when it said it’s willing to take additional steps to spur growth.
A government tax credit of as much as $8,000 gave housing a temporary lift late last year and into 2010. Demand plunged in July, the month after buyers were originally required to close deals in order to get the incentive. The deadline has since been extended to the end of this month.
“The tax-credit program did boost housing arbitrarily,” Silvia said. “Once that was out you just don’t have the depth in the marketplace.”
While mortgage rates are near record lows, many would-be homebuyers are unable to qualify, according to Silvia.
“A lot of institutions are willing to make mortgages to good credits at those interest rates, but clearly if you’re not a good credit, if you’ve had some challenges in the last three to five years, yeah, interest rates are low, but unavailable.”
Mortgage rates for fixed 30-year U.S. loans stayed at 4.37 percent in the week ended today, Freddie Mac said in a statement. A five-month slide in borrowing costs pushed the rate for a 30-year loan to a record low of 4.32 percent in the week ended Sept. 2.
Sales of existing homes climbed in August to a 4.13 million annual pace, second only to July’s 3.84 million rate as the weakest in a decade’s worth of data, the National Association of Realtors said today in Washington.