If you've been wondering when the housing market will turn around, Moody's Economy.com says it has the answer -- 2009 -- provided market conditions cooperate.

The report, "Aftershock: Housing in the Wake of the Mortgage Meltdown", forecasts the beginning of the end to housing market woes early next year, but only with the alignment of significant housing market conditions.

Economy.com's report says to generate the turnaround, homebuilders must further curtail housing starts, sellers must shave more off asking prices and lenders will have to loosen their purse strings.

To put the housing market on the road to recovery, new homes constructed must fall to 1 million this year, down from the estimated 1.2 million last year. Overbuilding has gotten some of the blame for the housing market slowdown.

The report says the national median home price will have to tumble 12 percent compared to peak prices. Prices have already fallen 5 percent from their high point, according to the "Aftershock" report which incorporates the respected Case-Shiller Home Price Index, a measure of home price appreciation.

Real estate agents say many home sellers are still stuck on "boom" and unable to recognize market pressures signaling them to lower listing prices.

Along with a smaller inventory of homes and lower home prices, a market turnaround will also depend upon more loan modifications to help stop foreclosures from flooding the already oversupplied market.

Creditors must also ease their grip on financing so more consumers can buy homes.

Creditors tightened money supplies after many subprime and non-traditional mortgages defaulted causing turmoil not only in the lending sector but for mortgage-backed securities as well.

"Aftershock" also reports federal policymaking already offers a promising outlook for a 2009 housing market recovery. The Bush Administration, legislators and regulators are fully engaged in heading off the recessionary impact of the hard-pressed mortgage market, according to the study.

The Federal Reserve has lowered interest rates, Congress recently passed and the president signed the "Mortgage Forgiveness Debt Relief Act of 2007," and lawmakers have several more major pieces of legislation in the pipeline to assist homeowner.

"The most significant upside risk to the housing outlook is that policymakers appear fully engaged in stanching the financial turmoil and ensuring that the economy avoids recession," the report concludes.

Published: January 8, 2008

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.