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Conservative Property Index Predicts We Are Less Than Half Way Through Fall

November 8, 2009

property price index fhfa 1991 forward by NewObservations.net

PRICE TRENDS / WAR OF THE WORLDS (Part 3): The most conservative price data on residential properties predicts that values have fallen from the peak less than half of the way towards their long-term trend.

The total projected fall from Federal Housing Finance Agency (FHFA) data shows a peak-to-trend fall of 27%. Values on this index have fallen 11% from the high. The index predicts prices will fall an additional 18% from their current levels (please see chart above “Figure 2: Monthly House Price Index for USA”).

The FHFA prediction of a total fall of 27% is far less than the total fall of between 49% and 60% predicted by Case-Shiller. Click here and here to see recent posts with Case-Shiller data on either 22 years or 118 years of prices.

Based upon the three data sets reviewed, we can estimate a total fall of between 27% to 60% from the bubble top to the long-term trend. The average of the three indexes projects a total fall of 45% from the bubble high.

Looking ahead from today, property values would fall a total of between 18% to 44% to return to trend. The average of the three data sets says we still have 27% to fall from our current price levels. Please see the chart below which shows the critical numbers for the three data sets and the averages.

Click here to see the data in both numbers and charts at “Property Price Index”.


property price index summary of indexes by NewObservations.net

Michael David White is a mortgage broker in Chicago.

One Comment
  1. john rubino permalink
    November 9, 2009 7:51 pm

    chilling stat. look out below!

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