Home Price Recovery Will Take Three Years, Morgan Stanley Says

There's more pain ahead for the housing markets, according to a recent report from Morgan Stanley.

How likely is this nightmare, and what can you do with this information?

"We see potential for another 5-10% decline in nominal prices over the next year," said the authors of "U.S. Housing Strategy: The Long Road Home," an analysis out this month from Morgan Stanley.

Even after home prices hit bottom, Morgan Stanley's experts think home prices will stay low "for another three to four years, during which annual appreciation may reach only as high as inflation or income growth."

Only a few economists still expect a big drop to home prices this year, though most expect prices to sag.