The United States housing market will have a double-dip downturn consultancy, Capital Economics, says. Surging supply, falling demand and limited credit mean the upturn in prices during the autumn and winter will end when government tax credits are withdrawn this spring.
Ironically, past price falls and current low interest rates mean house prices are affordable once again, but demand is limited, because few households are willing to take on new mortgages, preferring to pay off debt instead.
Prices rose 8 per cent from their lows during the recent recovery, but will drop 5 per cent in the second downturn. A fading economic revival and continued high unemployment mean up to five million homes will be foreclosed over the next couple of years says the consultancy.
The good news, is that a second downturn won't trigger a financial crisis, unlike the first property market collapse, and price reductions may tempt buyers, underpinning a more sustained recovery later.
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