us housing market to bottom in 2012
News Posted On: 06 December 2011
Well, good news at last. The US housing market is going to bottom in the second half of next year -- yey!
The predictions come from the well respected Goldman Sachs, who have constructed a new and very complicated sounding model for analysis.
In a report published late Friday Goldman's analysts, Hui Shan and Sven Jari Stehn, project that the national S&P/Case-Shiller home price index has 2.5% to fall before it hits bottom next summer. The Case-Shiller index of prices in 20 large cities is likely to fall 3.5% before hitting bottom in the second half of 2012, they say.
To reach this conclusion the analysts constructed a model of home prices in 147 metro areas to reach an equilibrium (one wonders how close this is to median) house price for each area, based on things like income, construction costs, borrowing costs, and population. The model also factors in things that can affect prices over the short-term like over-supply and sub-prime lending levels in the respective markets. Based on this number-crunching the pair determined that the US is close to reaching this "equilibrium" level, and will bottom when it is reached next year.
The pair also gave predictions for what they believed would be the strongest markets in the US next year, with Cleveland, Miami and Detroit being named as the top 3, with forecast price rises of 1%, 3% and 5% respectively over the next 2 years. Portland they say, along with New York and Atlanta are still overvalued and will not perform so well.
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Written by Liam Bailey
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