by Calculated Risk on 3/13/2008 04:17:00 PM

From Phil Izzo at the WSJ: Housing Market Has Further to Fall

On average, economists see a 5.3% drop in house prices, as measured by the Office of Federal Housing Enterprise Oversight, in 2008 and a 1.3% decline in 2009.
...
Ethan Harris of Lehman Brothers said the bottom [for house prices] won’t come until the third quarter of 2009, and warned that “home prices will bottom later in many bubble regions.”

Harris makes a key point: the price bottom will happen at different times in different areas. I expect 2008 to be the worst year in terms of percentage price declines, followed by a few years of smaller declines in the bubble areas. For previous local housing bubbles, it took about 5 to 7 years from peak to trough - and that is my expectation this time too.

Separately, the debate continues to rage over which home-price measure — Ofheo or Case-Shiller – provides the best snapshot of the situation. A slim majority 55%-45% chose the Ofheo index, but problems with both indexes were clear. Ofheo was derided for its limitation to loans backed by government-sponsored entities that leaves out jumbo and nonconforming loans, while Case-Shiller’s more limited coverage of U.S.

I believe the Case-Shiller index is more accurate for the cities that they cover. The Case-Shiller National index probably overstates the price declines, but I think it is closer than OFHEO.