The exhaustive Freddie Mac price index fell 2% nationwide in the 3^rd quarter and analysis of its data predicts prices will continue to fall for the next four years.

While Freddie announced Tuesday that its purchase-only index has gained for the past two quarters, the “Classic Series” of the Conventional Mortgage Home Price Index, which includes refinance appraisals as well as purchase values, has fallen 9% from the high in June 2007 and 3.8% for this year.

The projections say homeowners have lost only $1 for every $3 they can expect to lose in the end.

The trends show values will fall for four years through September 2013. Readers should take this estimate as an educated guess. The estimate may have greater relevance than forecasts described in mainstream-media headlines which typically fail to place new data within a long-term trend.

Widespread bullishness has lifted hopes for property values based largely on the definitive Standard & Poor’s/Case-Shiller home price index. The 10-city index has risen 5% from its April low.

A composite of projections derived from four major indexes — Freddie Mac, Case-Shiller, First American, and the Federal Housing Finance Agency – predicts a total fall from peak to trend of 35%. That same average of averages shows values falling nearly 20% further from their current level.

Real estate bears counter the bulls by arguing that record mortgage delinquencies will overpower inventories and that widespread credit-bubble debt will either stunt growth or ruin lenders and homeowners. The federal government is throwing everything including all of its kitchen sinks in to the fight over residential property values.

“The lowest average fixed-rate mortgage rates in a half-century, lower house prices, incentives to encourage first-time buyers, and loan modification efforts to stem foreclosures have worked together to support sales and reduce the inventory of unsold homes,” said Frank Nothaft, Freddie Mac Vice President and chief economist.

For more charts on the four major residential property indexes, visit “Residential Property Price Index”.

This post was originally carried by the Implode-O-Meter Blog.

***

Thanks for carrying the story to:

The Automatic Earth

Jesse’s Cafe Americain

Mortgage News Clips

***

Michael David White is a mortgage broker in Chicago.