How low will housing prices fall?
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This chart, from Calculated Risk, is worth bookmarking for future reference. It shows JPMorgan’s thinking on where we are in the housing price cycle -- a bit more than halfway down from the peak, and still falling rapidly. The chart shows the ratio of housing prices to income, and makes clear two things:
1) We were in a price bubble of massive proportions 2) Prices remain well above historical levels
If you look closely, there are three possible paths for prices over the next two years, according to JPMorgan’s models. Here are the paths:
JPMorgan presented three scenarios: a base case (with national prices falling 25% peak to trough), a deeper recession (28% decline), and a severe recession (37% decline).
And here’s Calculated Risk’s take on those projections:
I think the JPMorgan base case is too optimistic. My guess is that national house prices will decline somewhere between JPMorgan’s ‘deeper recession’ (28% peak to trough) and their ‘severe recession’ (37% peak to trough) projections.
Your thoughts? Comments? E-mail story tips to Peter Viles