Residential lenders and investors no longer have to fear steep declines in home prices and mortgage credit should become more available later this year, according to a new report from Bank of America/Merrill Lynch.
While some analysts are predicting an additional 10% to 15% of declines in values, Chris Flanagan and fellow strategist Jimmy Nguyen at B of A/Merrill see only modest reductions before prices bottom out in the first quarter of 2012.
“We anticipate that prices have just 3% more to go from the 1Q2011 level before hitting bottom,” the two wrote in their ‘Securitization Weekly Overview’ note to investors.
In an interview, Flanagan said home prices will rise this summer and then begin to fade in the fall (as usual) before hitting bottom in the first quarter.
Prices will be “basically flat” in 2012, he said, followed by a 3% rise in prices in 2013 and 4% rise in 2014. He noted the housing market is going to turn because it is “so cheap” and lenders will start loosening credit standards “quicker” than many expect.
“It is not going to be a dramatic loosening,” Flanagan stressed. “But it is going to start moving in a direction that will feed on itself and you will see people respond and competition respond.”
