U.S. Home Prices May Fall 11% This Year, Morgan Stanley Says

04-25-2011 • Bloomberg.com

U.S. home prices will fall 6 percent to 11 percent this year, more than previously forecast, as mortgages become harder to obtain and distressed sales drive down values, according to Morgan Stanley. Prices will have lost as much as 39 percent from their 2006 peak through the first half of 2012, according to measures such as the S&P/Case-Shiller index, analysts Oliver Chang in San Francisco and Vishwanath Tirupattur and James Egan in New York said today in a report. Morgan Stanley previously estimated values would drop 35 percent from the peak. “We revised our outlook lower for two key reasons,” Chang wrote in an e-mail today. “First, home prices have fallen more than we expected since our last published forecast in early December 2010, and second, sales activity has remained weak, especially for mortgage-dependent transactions, which are needed to support the non-distressed market.” Home values are dropping as foreclosures, which sell at a discount, undermine real estate prices. Distressed properties, including foreclosures and short sales, made up 40 percent of existing home purchases in March, the National Association of Realtors said April 20. Short sales occur when a lender agrees to sell for less than the mortgage balance.