U.S. home prices likely to fall 10 percent

Lexington, Mass -- U.S. home prices will likely fall an average 10 percent before the real estate market stabilizes, economists said.

"We think (the median price) is going to drop probably about 10 percent" over the next few years, Global Insight Inc. housing economist Patrick Newport told The Christian Science Monitor.

The U.S. median home price is $210,200, down 3.3 percent from a year ago but 7.6 percent above 2004 levels.

Falling home prices could exacerbate foreclosure rates, economists said.

The more home prices fall, the greater will be the number of recent buyers whose homes are worth less than their mortgages, prompting some homeowners to walk away from their homes and find a cheaper rental, economists said.

A rising foreclosure rate could push prices down faster, because a foreclosed home tends to sell at a much lower price than the same home sold under a typical broker listing.

But "prices don't necessarily have to plunge" to return to historical norms, Moody's Economy.com Chief Economist Mark Zandi told the newspaper.

"If rents and incomes increase by 5 percent per annum ... we would be back to those historical norms" in about five years, he said.

But the housing market will stabilize more quickly if prices fall 10 percent he said.

Copyright 2008 by United Press International.