Property prices in the US have reached bottom and the real estate market is past its trough and will move towards recovery in the next 25 months, according to economists.
An upbeat report from analysts JPMorgan says that after three and a half years of a negative stance on the future of housing, it is confident that the housing market is moving forward.
And a poll of leading US economist by Reuters indicates that a third of the 41 questioned, believe that prices reached their bottom in April.
According to Michael Rehaut, an analyst at JPMorgan supply is now more manageable and demand is beginning to re-emerge. With the market’s stabilization, Rehaut reported that builders will demonstrate growth, which has been a historical catalyst for recovery, and home prices will approach the end of the current period of decline.
Over the next 24 months, analysts do not expect housing starts to make a quick upturn toward historical averages while they are still 31% below what they were in the third quarter of 2008 before the fall of Lehman Brothers which catapulted the US into recession and are some 60% beneath their 25-year average.
The JPMorgan report indicates though housing starts can see a moderate recovery as they have usually rebounded with GDP growth, which the economic team at JPMorgan expects to see through 2010.
And although the Reuters poll suggest that residential property prices are nearing the end of a three-year slump and should rise in 2010, it also points out that stability in the real estate market does not mean recovery as record high foreclosures, a sizable pool of bank-owned property, steep unemployment and wage cuts could lead to a rebound.
‘We believe that April of this year marked the trough for home prices, though the potential for a significant increase is limited,’ said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
‘A lack of credit availability, stressed consumer balance sheets and growing unemployment are not signs that suggest an environment of substantially rising home prices,’ added LeBas.
The poll also found that 29 of 39 economists said a housing price rebound is not needed to end to the economic slide but it would be a prerequisite for a strong recovery.