The economic forecasters at Moody’s have released a home price forecast for all the largest housing markets nationwide. The forecast maintains that the San Diego housing market will bottom out in late 2008 after having experienced a price decline of 10.9 percent.

The purveyor of such a dire outlook would have been laughed out of San Diego two years ago, but the fact is that the prediction is overly optimistic. I say that based simply on what’s happened so far.

According to the Case Shiller Home Price Index — which is pictured in yellow on the graph to the right and is as good a measure of aggregate home price movements as you will find — San Diego home prices had already fallen 7.6 percent from their peak as of June. That figure reflects pricing on deals closed in May or even late April, which means that the prices reflect neither the effect of the phase 2 credit crunch nor the increasing prevalence of must-sell inventory over the ensuing months. Given those factors, it’s a fairly safe bet that prices have declined even further since June. We may not be terribly far from that 10.9 percent figure right now.

Considering the (still) sky-high home price level, the record number of foreclosures, the anemic housing demand, and the suddenly much tighter lending environment, it seems hard to believe that prices are going to fall barely more than they’ve fallen already.


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