Analysts at Fitch Ratings said yesterday they believe home prices across the United States are in store for another 10 percent decline before they begin to stabilize in 2010.

Nationally home prices have declined by 22 percent during the current housing downturn, according to the New York-based research and ratings agency. Fitch expects prices to decline 30 percent overall from the peak national price reached in 2006. Between 2004 and 2006, prices rose 29 percent on a national basis, which is one of the largest growth periods on record, according to Fitch.

Over the next 18 months, Fitch predicts national housing prices will slide back to levels that were seen in 2003. After reaching that point, Fitch expects price stabilization to set in.

However, several factors could change the housing outlook.

“Should economic conditions become much worse than expected, home prices would decline more than Fitch’s projection and price stabilization would be delayed,” stated Huxley Somerville, a Fitch group managing director.

At the same time, government efforts to fix the credit markets and housing market could swing things the other way. “Government programs such as the US Treasury’s Trouble Asset Relief Program and expanded mandates for Fannie Mae, Freddie Mac, and Federal Housing Administration to increase loan purchases and originations may facilitate liquidity in the housing markets, which could have a positive impact on prices,” said Fitch senior director Suzanne Mistretta.

Fitch, which used the Case-Shiller home price index in conducting its analysis, plans to release a special report with a more detailed look at housing prices, including a regional analysis, at a later date.

What are your instincts on the prospects for housing prices now? Do you think the economy will weaken further and drive housing prices even lower, or do you think government efforts to right the economy are working and will prevent prices from dropping to 2003 levels?

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