With foreclosures and unemployment still rising, housing prices have further to fall, according to an article by Beth Kowitt December 9, 2009 for the Fortune Investors Guide.

According to Moody's Economy.com, which compiles an annual forecast for home prices based on national and local indicators in 100 U.S. metropolitan areas, only one market -Pittsburgh - is expected to turn positive in 2010.

Home sales have improved, recently hitting their highest level in more than two years, according to the article, which stated that "here's been talk of bidding wars resuming in places like Silicon Valley and New York City. And cocktail party chatter everywhere has started to turn to talk of a bottom."

But, the article cautioned that Mark Zandi, the chief economist of Moody's Economy.com, "has some sobering predictions: Home prices are going to fall 5% to 10% more - and over 30% in places like Miami - between now and this time next year. Then they might start turning around. (Emphasis on 'might.') At the top of Zandi's list of worries are foreclosures - specifically, the millions of loans that are in foreclosure or headed there that can't or won't be modified. According to RealtyTrac, nearly 2 million housing units in the U.S. are in foreclosure or bank-owned, and millions more are likely to join them. Zandi estimates that 2.4 million homes will find their way into foreclosure next year. He expects banks to start putting those properties on the market more aggressively during the first half of the year, resulting in a flood of cut-rate inventory that will drag prices down."

A soft job market, however, means that potential buyers don't have money to pour into new homes or the confidence that they'll be able to hang on to their jobs and pay the mortgage on their existing home, the article continued. At the same time, it said that policymakers may pull their support from the market prematurely: "Aggressive government moves, like the recently extended first-time-homebuyer tax credit and the Fed's purchase of mortgage-backed securities, have been propping up the market. The purchase plan is set to expire in March, which Zandi says could bump mortgage rates up as much as a full point."

The Economy.com's housing price outlook for 2010 is divided into 100 metropolitan areas and last year its projections were fairly accurate, forecasting a 14.5 percent decline this year and the actual figure is likely to come in at 13.2 percent.

The survey maintained that the weakest areas are Florida, California, Nevada, and Arizona - what Mr. Zandi calls the "usual suspects" - where foreclosures are highest and likely to rise and the worst market is Miami where the 2009 median home price of $183,530 is expected to decline 33 percent.

If there's a bright spot, it continued, "it's pockets of the Midwest - states like the Dakotas, Kansas, and Nebraska, which have stronger economies based on agricultural and energy industries. Then there's Pittsburgh, which didn't have much of a housing bubble to begin with and is the only market projected to grow next year, up 0.41%."

"It's clear we're closer to the end of this crash than the beginning," says Mr. Zandi, adding that housing is more affordable, and construction is still low: "We're moving in the right direction, and that's reason for optimism," he says.

In New York City, the 2009 median house price of $416,730 is expected to decline 15.63 percent next year but only 1.33 percent in 2011, while in Los Angeles, the 2009 median house price of $260,250 is expected to decline 19.41 percent next year and climb 8.43 percent in 2011.

In San Francisco, the report said that the 2009 median house price of $510,210 is expected to decline 7.97 percent next year and climb 14.30 percent in 2011.