Housing prices forecast to fall in 2010 -- and could keep falling for years

Charles Hugh Smith

Fiserv, a financial information and analysis firm, is forecasting that national median home prices will fall 11.3 percent by summer 2010. The recent surge in home sales and new homes under construction have launched a feeding frenzy in the hardest hit Sunbelt and California markets as investors believe "the bottom is in." The Fiserv forecast -- and the fundamentals of supply and demand -- are throwing cold water on that confident enthusiasm.

Foreclosures are still rising as defaults rise in prime mortgages, which were once viewed as immune to the high defaults hitting subprime loans. As I have reported here before, the foreclosure pipeline -- not just homes that have been foreclosed, but those in default -- is bulging.