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Housing Prices Unlikely to Recover Before 2020, FICO Survey Finds

October 3, 2011 Comments off

Housing Prices Unlikely to Recover Before 2020, FICO Survey Finds
Source: Fair Isaac Corporation (FICO)

FICO’s latest quarterly survey of bank risk professionals offered a decidedly pessimistic outlook, reversing the growing optimism seen in late 2010 and early 2011. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on consumer loans to rise, underwriting standards to become stricter, and the housing sector to continue struggling far into the future.

When asked if housing prices nationally would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. By comparison, 21 percent said yes. And the negative sentiment extended beyond property values. Among bankers surveyed, 73 percent believed mortgage defaults would remain elevated for at least five more years. Furthermore, 46 percent of respondents expected mortgage delinquencies to increase over the next six months, and only 15 percent of respondents believed mortgage delinquencies will decline during that period.
“Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation. This puts the devastation of the housing crash into perspective.”

+ Full survey results (PDF)

Hat tip: PW

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