Housing Recovery May Not Come Until 2020

NEW YORK (MainStreet) -- It really is a tale of two trends when it comes to the U.S. housing market.

On the short term, things are looking a bit better: According to the Standard & Poor’s Case-Schiller Home Price Index, the housing market has shown four straight months of home value growth, with both S&P’s 10-city and the 20-city indices both up 0.9% in July. The Case-Schiller reading, taken Sept. 27, shows that even sluggish markets like Detroit and Minneapolis showed improvement on a month-to-month basis.

“With July’s data we are seeing not only anticipated monthly increases, but some fairly broad improvement in the annual rates of change in home prices,” David M. Blitzer, chairman of the index committee at S&P Indices, said in an official statement. “While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery.”

Now, new data shows that recovery could be farther off than homeowners had hoped.

FICO’s latest quarterly survey of bank risk managers, released on Sept. 30, estimated that a U.S. housing recovery wouldn’t happen before 2020. And that’s a rosy scenario.

Specifically, the FICO survey asked bank risk managers if U.S. housing prices would return to 2007 levels before 2020. 49% of the bank managers said “no”, while 21% answered in the affirmative.

And that’s not all – FICO has some more bad news for the housing market:

• 73% of bankers say that mortgage defaults would “remain elevated” for five more years.

• 46% of bankers say that mortgage delinquencies will rise over the next six months.

• Only 15% of bankers say that mortgage delinquencies will fall over the next six months.