In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Wednesday, September 19, 2007

Moody's Forecasts House Prices to Fall 7.7% Nationwide

by Calculated Risk on 9/19/2007 04:38:00 PM

From CNN Money: Double-digit home price drops coming

According to an analysis conducted by Moody's, declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.

The survey attempted to identify the high and low points of housing prices in each of the markets, some of which started declining from their peak in the third quarter of 2005. All are median prices for single-family houses.

Nationally, Moody's is projecting an average price decline of 7.7 percent. That's a jump from the 6.6 percent total price drop that the company was forecasting in June and more than twice that of last October's forecast of a 3.6 percent price decrease.
See story for Moody's price forecast for top 100 cities.

Here are the top ten by forecasted price declines:

RankAreaStatePeakBottomPeak to bottom
home price decline
2Palm Bay-Melbourne-TitusvilleFL06Q108Q4-24.9
8Oxnard-Thousand Oaks-VenturaCA06Q208Q3-19.2
10Las Vegas-ParadiseNV06Q208Q4-18.7

Look at the price bottoms; Moody's is mostly forecasting the price bottoms to happen in late 2008. That would make this one of the shortest duration housing busts with similar price declines in history. Historically declines of this magnitude have taken 5 to 7 years because house prices are sticky.

My guess is prices will decline further than Moody's is expecting, and the duration of the bust will be longer.