At least there are those who hope and think it’s hit bottom, but no one is predicting it will rise again for years.
There’s more that will keep home prices from rising, once they do hit bottom. First, many Americans don’t have the required down payment or can’t qualify for a mortgage. Banks are making borrowers jump through more hoops in order to produce loans that can’t be subjected to a costly “buy-back” demand from Fannie Mae, Freddie Mac or other investors if the loan defaults. That is keeping credit very tight.
More than one-third of all homeowners have less than 25% equity, including 15% that are underwater, meaning their homes are worth less than what they owe.
Second, inventory declines may be less of a sign of health than they would suggest and instead reflect one of the structural problems holding back housing: Sellers are frozen, either unwilling or unable to sell at current values. Markets above the entry level, where demand from investors and first-time buyers isn’t as strong, face a particularly steep climb because of that equity hole.
“Nobody’s voluntarily putting their home up for sale,” said John Burns, a home-builder consultant based in Irvine, Calif.