How Far Will Housing Prices Fall?

The longest-running and most-trusted data source on property values shows a current fall from the peak approaching 40% -- a substantially higher cut in prices then is widely reported and an ominous precursor of the prospect of prices falling by half (click to enlarge images):

The Case Shiller index starting in 1890 has recorded none of the stops and mini bubbles seen in other indexes (please see chart above) and in any case all of the mini bubbles have since broken. Falling values are now at crash lows for all four indexes we reviewed.

HousingStory.net shows 2010 as a four percent loss for national property values. We project a fall in 2011 of nine percent.

The best news in our analysis of four key price indexes is that the fall appears to be nearly three-quarters of the way done – if the fall stops at trend values. We determined trend values by projecting from prices starting in the 70s and running to the end of the 90s (Please see the chart above summarizing our findings.).

The HousingStory.net average of indexes predicts a total fall from peak-to-trend of 33%. By that measure current vales have fallen 24% from the top.

All of our forecasts are based on the assumption that the 70s to 90s period has less bubble pricing in it. The exception to that rule is the Case-Shiller index whose data goes back to 1890: We use the full data set of 121 years to determine a trend value.

The long-series Case-Shiller prices are down 37% from the 2006 high – a national fall in values much higher than the other indexes whose updates are widely followed and reported. We expect the long-series Case-Shiller to ultimately fall by 48%. The more popular price indexes have fallen from a low of 11% (Federal Housing Finance Agency) to a middle-ground of 17% (Freddie Mac) to a much higher fall of 32% (CoreLogic).

We chart all of the price indexes below. Please stay tuned in the next few weeks for chart mania and our Spring Guide of 30 Key Charts To See Before You Buy or Sell Your Home.

For 2010 we overestimated the actual fall please see our old forecasts here and here and here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.