Monday, November 15, 2010

S&P predicts house prices to fall another 7% to 10% through 2011

by Bill McBride 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).

House Prices and Months-of-Supply 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.