NATIONAL HOUSING TRENDS ~ Experts expect prices to stagnate for year

SLOWING MARKET HITS HOME SELLERS

Although few experts predict that home values will fall dramatically in 2007, many economists say that prices won’t improve for 12 to 18 months.

Ambitious building booms in many markets in the past five years, combined with mortgage interest rates that have increased about 1 percent in the past year, have resulted in residential real estate stagnation. The gridlock defies conventional wisdom, stubbornly remaining neither a buyer’s nor a seller’s market.

• “We are currently experiencing the worst of the market freeze, which is being exacerbated by the gap between the buyer’s desire for bargains and the seller’s fantasy of what they once thought their homes would be worth,” said Diane Swonk, chief economist for Chicago-based Mesirow Financial, who forecasts a rebound in early 2008.

• “The good news is that there are some signs of stabilization. The bad news is that a substantial backlog of unsold homes still exists.”

In expensive coastal cities, economists say, price appreciation hit a wall. San Francisco and Boston - where many investors enjoyed double-digit property gains in the late 1990s and the first half of this decade - have simply become unaffordable.

• “Areas along the coast of the nation and the large urban areas tend to see stronger price gains in housing upturns, and stronger declines in downturns,” said Celia Chen, a housing economist with Moody’s Economy.com.

• In Sun Belt havens such as Las Vegas and Phoenix, overzealous construction resulted in a glut of new homes and condos. Real estate experts say sellers and developers there will struggle throughout 2007.

Source: Rachel Konrad, AP Business Writer