Home prices not done falling

Look for home prices to slide perhaps another 7% between now and midyear 2011, according to FiServ, a market analytics company based in Brookfield, Wis.

If that forecast is right, home prices nationally will have dropped 34% from their peak by the time they hit bottom.

For as many as three million Americans, the dream of owning a home has faded. Home ownership has declined from its peak of 69.1% in 2005 to 66.9% today (CNNMoney.com Nov. 2). Additionally, the vacancy rate among homes designated owner-occupied is 2.5%. Housing starts are at 600,000 a year, well below the normal replacement rate; few new homes are being built.

Despite low mortgage rates, which averaged 4.3% in September for a 30-year fixed rate and 3.8% for a 15-year rate, "people aren't going to be in the market if they can't find jobs--or feel insecure about keeping their jobs," says Susan Tiffany, CUNA's director of consumer periodicals.

Young people have been hit hardest by the economic turmoil. For those younger than age 35, home ownership dropped 9%, with 39% owning homes, compared with 43% at the beginning of 2005. Also hit hard, Americans 35 to 44 saw their ownership rate fall 7%, from 70% to 65.2%; 45- to 54-year olds saw ownership drop 5%, to 73% from 76.5%; and homeowners 55 to 64 saw a 3% decline to 79% from 81.8%.

If you're in position to leverage today's low rates, Tiffany has these suggestions:

• Shorten the term of your mortgage. You'll probably need a strong credit score and at least 20% equity.
• Look to free up some cash. Refinancing can reduce your monthly payments or help you save money with a lower interest rate and/or shorter term for repayment.
• Expand your real-estate holdings. If you are looking for a second home, or an investment property, it looks like a buyer's market over the next year.

Tiffany offers one caveat: "Most forecasters are saying mortgage rates may rise gradually through 2011."