US property prices expected to fall up to 10% in 2011, according to analysts

International bargain hunters are set to find residential property prices in the US even lower as analysts predict further prices falls.

Moody’s Analytics is predicting a 5 to 10% fall in prices in the first six months of 2011 and other point out that prices are actually lower than many of the main real estate indices indicate.

According to Mark Zandi, chief economist at Moody’s Analytics, even a modest growth in US real estate prices is unlikely until 2012.  He believes that demand and supply for homes are bottoming out, though an increase in distressed sales will continue to keep values down.

Hedge fund founder Greg Lippmann also believes a 10% drop is likely in 2011. While buyers of home loan securities are anticipating the decline, investors in other markets aren’t pricing in the potential drop, Lippmann said at the Hedge Funds New York Conference hosted by Bloomberg Link.

Also the property market is weaker than some indices indicate, according to the latest monthly report from Radar Logic. The real estate and data analytics company said its RPX home price index for September showed a decline of 2.7% from August and a 1.9% drop from a year earlier. The index tracks sales in 25 metropolitan statistical areas across the country.

While the most recent Standard & Poor’s/Case-Shiller 20 city composite home price index shows a monthly fall of 0.7% in September. And the Federal Housing Finance Agency third quarter report shows prices down 1.6% on the second quarter of the year. It also said prices are 3.2% down year on year and 8.4% below what they were five years ago.

There are also signs that more foreclosed properties are being bought and this could indicate a rise in interest from foreign buyers. The market for sale of foreclosed homes outperformed other markets during September, according to Radar Logic.

‘As long as activity focuses on the massive inventory of distressed assets, we expect the outlook for housing values to be negative,’ said Quinn Eddins, Radar Logic director of research.

The company said the state of the nation’s housing markets looks even worse when one holds aside motivated sales. Radar Logic said its data suggests composite prices for the roughly 70% of September sales, excluding foreclosure sales, were off 2.8% from August and 3% lower than a year earlier.

Radar Logic said sales of homes not in foreclosure are at the lowest level since the company began tracking the data in 2000. Total home sales fell 6.4% in September from the prior month and are nearly 20% lower than the year earlier.

Higher sales levels of REO homes could be ‘a lasting and not simply a seasonal trend,’ it said and warned that it ‘could have a deleterious effect on the prices on all homes, not just those sold out of foreclosure’.

The company said the end of homebuyer tax credit earlier this year along with other government programmes aimed at keeping people in their homes has exposed the underlying market imbalance and prices are declining as a result.

‘In hindsight, it appears that government interventions provided a slight and temporary boost to housing markets, but have not spurred a lasting and self-perpetuation recovery,’ Eddins said.