by Calculated Risk on 11/15/2010 05:05:00 PM

From Jon Prior at HousingWire: S&P predicts more home price declines through 2011

Standard & Poor's analysts believe home prices will drop between 7% and 10% through 2011 ...

"Low mortgage rates ...influence on home buying activities has been limited due to the weak housing market and a lack of demand," S&P credit analyst Erkan Erturk said. ...

Prices will continue to be pressed down as long as the market works through a backlog of distressed properties that remains elevated.

This gives me an excuse to update the graph on house prices and months-of-supply. The following graph shows existing home months-of-supply (left axis), and Case-Shiller composite 20 house prices (right axis, inverted).

Click on graph for larger image in new window.

House prices are through August using the composite 20 index (a three month average of June, July and August). Months-of-supply is through September. The preliminary data indicates that months-of-supply was still in double digits in October.

This is one of the reasons I expect house prices to fall another 5% to 10% - and it looks like S&P is now forecasting about the same price declines.

Note: there have been periods with high months-of-supply and rising house prices (see: Lawler: Again on Existing Home Months’ Supply: What’s “Normal?” ) so this is just a guide.