Want to Know Why Home Prices Will Continue to Decline?

Mystery solved?

It is reported that “Home prices will likely decline another 8% from Q409 to the end of 2010, reversing recent gains in the market, for a 34% peak-to-trough drop, according to a Moody’s report which faults the “underwhelming” success of the government’s Home Affordable Modification Program (HAMP) as the key driver for the assumption,” according to Housing Wire.

While many are looking forward, others are looking backward, and this finger pointing is the beginning of what we predict will be a year of the blame game.

The difficulty in looking at the overall housing crisis and determining a cause right now is like determining a cause of death of a homicide victim prior to an autopsy. You’ve all seen CSI, right? Just because there is a hand cut off, it doesn’t necessarily mean the victim bled out that way; there may have been poisoning or something wacky, so there is no reason to look at one body part (or in the case of the real estate industry, one indicator) definitively as the cause of trouble without looking at the entire body thoroughly which can only be done after the fact which is why hindsight in economics is 20/20.

HAMP, but what else?

I say this with hesitation because I’ve personally written many articles on the failure of HAMP along with other writers here at AG. I think HAMP is a major factor in the continuing doom and gloom in the real estate sector, but general lending issues, rising foreclosures and shadow inventories also contribute.

What I’m most interested in is what the recovery process will look like? Is there a magic bullet that will actually help homeowners, buyers and sellers or has the global economy doomed this year as Moody’s indicates? What say you?