Housing Recovery? Green Shoots "More Like Crabgrass" Weaver Says

There are more signs of hope for the housing market. Improved median home prices and a revival of single-family construction combined with better-than-expected homebuilder earnings have bulls boasting.

Karen Weaver, global head of Deutsche Bank's securitization research division, takes a more measured approach. She thinks it's too "quite early to be calling a bottom" nationwide. "The green shoots are more like crabgrass."

Here's how she explains it:

Historically, from peak to trough, it takes more than four years for housing prices to bottom. That means some of the first and hardest hit areas like Phoenix and San Diego may, in fact, be near bottom. The Northeast, on the other hand, may still have further to fall since prices peaked in 2007.

However, if you're looking for a full recovery, don't hold your breath. Weaver says historically it takes 10 years for prices to return to previous highs.

In the meantime, prices will fall and foreclosures will rise. She believes national home prices will ultimately fall over 40% from peak levels, meaning recent talk of prices bottoming after a surprise turn in the Case/Shiller Index is premature.

Referring to a report done by the Federal Reserve of Boston - examining the Massachusetts downturn in the late ’80s – Weaver states, less than 7% of borrowers who had negative equity in their homes defaulted. Unfortunately, "the universe of borrowers is far riskier" today and unemployment more drastic. Therefore, she's not counting on such low default rates this time.

Source: finance.yahoo.com