Existing home sales are down roughly 50 percent from their peak five years ago, while new home sales and housing starts are off nearly 80 percent.
Despite this, Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, doesn’t see a “sharp bounce back” in 2011.
Instead, home sales are expected to rise only gradually as the economy sees mild improvement.
“I see four major factors standing in the way of a clear turn in the housing market, Lockhart said in remarks prepared for a speech at the Rotary Club of Atlanta.
“These are stricter mortgage underwriting standards, foreclosures continuing at a high level, elevated inventories of unsold homes, and slow employment and income growth.”
With about five million mortgages either seriously delinquent or in some stage of foreclosure, and nearly all of them expected to hit the market in the next two years (shadow inventory), downward pressure should push home prices lower.
“The consensus is for home prices to remain roughly flat this year, but some forecasters are predicting further, and in some cases substantial, declines.”
However, he said home building may be poised for some growth this year after being a drag on the economy for the past five years.