Home prices fell 3.2% during the second-half of last year, but as spring approaches values are bottoming out, according to a new report from Bank of America/Merrill Lynch Global Research.
"We expect roughly flat prices this year and next, with modest growth in 2014," B of A/Merrill reported.
Back in November, the bank's research analysts predicted that prices would decline by another 4% to 5% this year.
However, a B of A/Merrill proprietary home price model now shows that prices are "bottoming” due to favorable policy developments, better economic data, and a decline in the supply of homes on the market.
In terms of "positive policy" developments, the analysts cite the rollout of the HARP 2.0 program, the $25 billion settlement between the five major servicers and state attorneys general, and a new REO bulk sales program that converts GSE foreclosures into rental properties.
The REO-to-rental is a "win-win for the housing market and the economy" by removing excess supply from the market, the firm writes.
Chris Flanagan, head of U.S. mortgage research, and senior economist Michelle Meyer authored the B of A/Merrill Lynch Global Research housing price forecast report.
Of course there's a bit of irony in the report: Although the bank sees better days ahead for housing, B of A is slashing its presence in the residential origination and servicing markets.
