Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

2008 outlook: Housing

Prices will sink even deeper. When it comes to housing, 2008 will be one bleak house scenario.

Subscribe to Personal Finance
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Amanda Gengler, Money Magazine writer-reporter

Make money in 2008:
The entire outlook

(NEW YORK) Money Magazine -- Although home prices nationwide are down 4.2 percent from a year ago, "the worst is yet to come," says Joshua Shapiro, chief U.S. economist at consulting firm Maria Fiorini Ramirez.

Just how bad will it get? According to Fiserv Lending Solutions, the median home price nationwide is expected to tumble 5.7 percent next year, which would make it the worst year for real estate in at least 40 years.

And some previously sizzling markets in places like Florida and Nevada will likely suffer double-digit drops. "You'll probably see a turnaround sooner in the Northeast because there wasn't as much overbuilding," says Patrick Newport of Global Insight, an economic forecasting firm. Even some midwestern cities like Cleveland and Detroit, which never experienced a boom, could see modest drops due to their ailing economies.

The problem stems from that classic economic conundrum: too much supply and too little demand. As of September, some 4 million existing homes were languishing on the market - almost double the number three years ago - in addition to 523,000 new homes.

Homes in foreclosure, projected to jump 25 percent next year to 1 million, further add to the backlog. Lenders, meanwhile, have dramatically tightened their borrowing requirements as defaults have risen, shrinking the pool of qualified buyers.

If you were hoping to sell a home anytime soon, it's a pretty grim picture. Prices aren't expected to rebound until 2009 at the earliest, and most experts think it will take several years for home values to get back to pre-bust levels.

But if you're a homeowner who bought before 2005 and you intend to stay put for a few more years, you'll probably still come out with a healthy profit by the time you're ready to sell. Hoping to buy a new home? You'll find listing prices in many areas lower than they have been in the past couple of years - and plenty of anxious sellers willing to offer you an even better deal.

The wild card: One of the biggest threats to the housing market is that the labor market might weaken beyond current forecasts and some people who lose their jobs might be forced to put their homes up for sale. That would throw even more houses on the market and could lead to an uglier double-digit drop in prices nationwide.

2008 outlook: Investing To top of page

Send feedback to Money Magazine
Photo Galleries
Top luxurious hotel suites for business travelers For many people, you can't put a price on comfort. More
Million-dollar startups: These firms scored big sales their first year Their first year in business, these companies generated $1 million in sales. More
The 10 best states for retirees It might be worth moving to a new place to find your dream retirement home. Check out these 10 states. More