Bank Watch

Bank of America analyst predicts home prices will start falling in 2017

A Bank of America analyst is predicting a slump in U.S. home prices resulting from personal income gains failing to keep pace with the recovery from the financial crisis.
A Bank of America analyst is predicting a slump in U.S. home prices resulting from personal income gains failing to keep pace with the recovery from the financial crisis. Bloomberg

Here’s a grim prediction for American homeowners who expect to continue seeing gains in property values.

A Bank of America analyst is forecasting the U.S. housing market will experience three straight years of “modest” declines in property values starting in 2017, Bloomberg reports.

In a report out this week, analyst Chris Flanagan said the slump in prices will result from personal income gains failing to keep pace with the recovery from the financial crisis.

To be sure, Flanagan’s prediction is not shared by everyone.

As Bloomberg points out: “The majority of market observers expect to see continued home price appreciation, though at a slower pace than the surges of recent years.”

Home prices continue to post such big gains in some markets that housing experts are predicting bubbles could be forming in those areas. I reported on those concerns in a story last month.

Here’s more from the Bloomberg story:

Providing fuel to Flanagan’s call is the size of the recent gains in housing prices amid a job market in which unemployment has declined but worker pay has barely improved.

“We do not see income growing fast enough to keep up with the past few years of rapid increases in home prices,” he wrote.

Flanagan, who in 2007 offered prescient warnings over the “very bleak” conditions in the subprime mortgage market, said that the downward path of prices would depress housing activity, the economy, and interest rates.

His forecast calls for home values to rise 3.7 percent this year and 0.8 percent next year, before declining 1.7 percent in 2017, 2.1 percent in 2018 and 0.8 percent in 2019.

Roberts: 704-358-5248;

Twitter: @DeonERoberts

  Comments