Wall Street Journal (03/13/08) P. C1; Patterson, Scott
Experts say residential values will play a major role in the direction of the economy in the coming months. Traditionally, home prices and incomes are aligned; but incomes rose more quickly than home prices during the 1990s. However, home prices surged almost two-fold from 2000 to mid-2006; while Moody's Economy.com reports that incomes grew only 26 percent during the same period. Housing expert Thomas Lawler says home prices grew 10 percentage points more than incomes between 2002 and 2006 in Arizona, California, Florida and four other states. He believes home prices will need to decline by 9 percent to 12 percent--and more in the aforementioned states--to realign with household incomes. However, economists at Goldman Sachs predict a 15-percent drop in home prices in the coming months; while economists at Merrill Lynch believe prices could fall up to 30 percent.
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