Home Prices Predicted to Fall 6 Percent Over Next 2 Years

New data from Fiserv, a division of Moody’s Economy.com, revealed that the average home price in the United States will fall by around 6 percent by Sept. 2011. This statistic may not sound too horrible; however, keep in mind that home prices have already fallen more than 27 percent nationwide in the past three years and we saw a historic drop in prices in the first quarter of 2010.

Home Prices Will Drop Then Stabilize

According to Fiserv, home price declines will mostly occur during the usually slow summer months of 2010. The company says after that the prices will begin to stabilize and stay flat through the fall of 2011. However, the bad part is that the 6 percent drop is just a nationwide average. Some states will see greater drops.

For instance, in Miami, Moody’s projects home prices to drop a whopping 29.2 percent. This is after an already unbelievable 47.7 percent drop over the past three years, leaving the area to drop 64 percent total. And in Hanford, Calif., prices are predicted to plummet 27.2 percent after already dropping 36.9 percent.

But the worst is Merced, Calif., which will fall 6.2 percent after dropping 71.8 percent over the past three years.

1 In 4 Mortgages Are Underwater

Representatives from Moody’s say that, unfortunately, the drop in prices has everything to do with mounting foreclosures. Some people can no longer afford their mortgage rates and others are simply underwater. In fact, according to First American CoreLogic, 24 percent of all homes with mortgages were underwater at the end of 2009.

Some homeowners try to stick out these difficult situations, buy many others decide to simply walk away.

However, Moody’s does predict that foreclosures will stabilize with mortgage servicers determine who can qualify for a modification in the spring. This will help to, in time, also stabilize home prices, which is necessary to stabilize the entire market and bring some order back to the economy.