House prices are likely to go down during the first half of 2011 and then rebound in the second half, according to many forecasters.

The consensus outlook is for the jobs market to strengthen and a renewal in household formation will reverse the slide in prices that began in August based on the Standard & Poor's/Case-Shiller house price index.

No one seems to be expecting much price appreciation. Home sales, however, are likely to rise 5% to 8% in 2011.

PMI Mortgage Insurance Co. chief economist David Berson expects house prices will increase a "tad" in 2011 and possibly by 1% to 3% in 2012. "We won't see normal price increases of 3% to 4% until 2013," Berson told National Mortgage News.

The S&P Case-Shiller HPI showed prices fell 1.3% in October and a mortgage analyst with Citicorp expects prices could fall another 5% by the end of the first quarter.

"The real question is whether price declines continue past the first quarter," said Citigroup Global Markets analyst Robert Young.

He noted the percentage of seriously delinquent mortgages has held fairly steady over the past year, which is good news, even though the number of foreclosures and REO sales has been increasing.

"We expect REO coming on the market to gradually increase and push prices down moderately," Young said. That might leave prices down by less than 5% by yearend.

If the economy weakens and job growth stalls, it becomes a "big problem" because of the huge amount of excess inventory and vacant homes.

"That is going to reduce demand and there is no reason why home prices can't continue to fall," Young said.

Mortgage banking consultant Brian Chappelle is concerned tight lending standards are hurting home sales and prices. With Fannie Mae, Freddie Mac and the Federal Housing Administration in business, it's assumed that all creditworthy borrowers can get a mortgage. "In today's upside down mortgage world that is not the case," he said.

Chappelle estimates lenders originated only 2 million purchase mortgages in 2010, compared to 3 million in 2009. "When you see that number, it is no wonder house prices are dropping again," he said. Chappelle is one of the founders of Potomac Partners in Washington.

The PMI chief economist noted that an improving economy may get the industry to "move a little bit toward easing credit standards."

Over the past year, Fannie and Freddie have been raising their upfront loan fees, which makes it more expensive for homebuyers.

"If Fannie and Freddie reduced their fees for homebuyers, it would certainly make it easier for people to buy homes and boost home sales," Berson said. But the former Fannie Mae chief economist stressed, however, that he doesn’t know what the GSEs are going to do with regard to upfront fees.

Fannie and Freddie just raised their upfront fees in December.

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