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.