Anticipating a 36% drop in home values from a 2006 peak at the height of the housing boom, Moody's Economy.com said that government policies could help end the long decline by the end of this year.


In the report by Moody's Economy.com, it stated home values in almost 400 U.S. metro areas have declined by an average of 25%, and will continue to decline by 11% before halting.

The report forecasts that once the market has completely corrected itself, it will have reached over 60% of the U.S. metro areas.

"Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight," said Moody's chief economist Mark Zandi.

"Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year."

"Policymakers have not yet been able to break the downward spiral that has developed among the sinking housing market, job losses, frozen credit markets, and rising foreclosures," Zandi said.

Officials expect that a full recovery will not be seen until late 2010, and the country will not come within reach of an unemployment rate of 5.0% until 2012, which nears the end of President Obama's term.

The new administration along with Congress are collaborating a $780 billion economic stimulus bill which will aid in boosting the housing and credit markets.

Legislators are working on bolstering home purchases amid six-figure-income families by doubling the current tax credit for first-time homebuyers earning less than $150,000 from $7,500 to $15,000 for all income classifications.

In 2005, the new and existing homes started to tumble, which marked the termination of a five-year U.S. housing boom stimulated partially by lax credit lending for subprime borrowers.

Moody's Economy.com report also revealed that an additional 11% drop in housing will occur before stabilizing.

The study also showed that Case-Shiller home price index will drop by 36% from its crest in 2006.

Southeastern Florida and areas of California housing prices will tumble by more than 50% from their peaks.

Naples, Florida is reported to receive the hardest hit in home values dropping 70.1% since its peak before spiraling to its bottom at the end of 2010.

Two California areas follow close behind - Merced, CA housing prices are forecasted to decline by 69.6% and Salinas by 67.9%.

Mark Fleming, chief economist First American CoreLogic, said in a recent conference if the stimulus bill was enacted immediately, the spirally of housing prices would not correct itself for at least a year.

"We'll have to work our way out," Fleming said.

"Home prices are not like Lamborghinis; they don't stop on a dime. They're more like trucks."