Moody's: Home Prices To Continue Decline Until 2009

Washington, DC (AHN) - A Moody's Economy.com report said the real estate market will continue to slump with home prices falling 10 percent to 25 percent until 2009.

The report, prepared for Forbes.com, identified Los Angeles and Sacramento in Calif., Las Vegas and Tampa, Fla. as among the slumping markets in the U.S.

To come up with the forecast, Moody's used inventory levels, job growth or loss, credit cost and availability based on present mortgage rates and the Federal Reserve's Senior Loan Officer Survey.

The estimate also includes home buyer expectations by markets using as its main measure the 18-month moving average of home prices. As prices dip sharply, buyers would likely defer purchasing decisions and wait out for home prices to further decline until it hits rock bottom.

Massive unemployment rates are the most potent negative influence on home prices, Eric Belsky and Daniel McCue, economists at the Harvard Joint Center for Housing Studies, told the Los Angeles Times.

There's no sense of stabilization. The foreclosures are causing a vicious cycle, and the job market is weakening. This doesn't feel therapeutic anymore. This is undermining the economy," Mark Zandi, chief economist of Moody's added, told USA Today.