Economist predicts home prices to keep falling

Frank Nothaft, chief economist for Freddie Mac, predicts that home prices will continue to fall while home sales increase in 2012. At a charity event in La Jolla, North Carolina, Nothaft told attendees that high unemployment and low consumer confidence will push already low home prices another 2 to 3 percent lower next year. But Nothaft also expects the record low interest rates and even lower home prices will drive up sales in 2012, North Carolina Times reported.

"U.S. house prices are likely to bottom in early 2012," Nothaft said. "Our forecast is for home sales to be up 5 percent compared to 2011."

However, Peter Orszag, vice chairman of global banking at Citigroup, wrote in a piece for BusinessWeek that the key to a housing recovery is through renting not home sales. Orszag believes there can be no economic recovery in the United States without a more aggressive approach to the weak housing market. Orszag believes the Obama administration should provide a tax write-off for investors who purchase foreclosed properties that are clogging the market and pushing the home prices lower. Then investors can transform these properties into rentals to meet the demand for affordable housing.

Not only are distressed properties clogging the market, but millions of Americans have negative equity on their homes. Homeowners who owe more on their mortgages than their homes are currently worth could see some recovery in equity if home prices stabilize with foreclosed properties being cleared out of the market, Orszag wrote.

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