by Calculated Risk on 9/10/2008 02:29:00 PM

From the Lehman conference call:

"[The Lehman] base case assumes national home prices drop 32% peak to trough, vs. 18% to date, with California down 50% vs 27% to date."
Ian T. Lowitt, Lehman CFO

The 18% corresponds to the reported decline in the S&P Case-Shiller U.S. National Home Price Index through Q2 (so I believe Lehman is using the Case-Shiller index or something very similar).

In other words, Lehman's base case assumes that house prices have fallen just more than half way from the peak.

It was just last December that Ben Stein argued Goldman's projection of a 15% peak-to-trough decline in national home prices was implausible (Goldman is projecting another 10% decline now). And Professor Krugman responded to Ben Stein:

For what it’s worth, Goldman’s forecast of a 15 percent decline in home prices seems implausible to me, too — but on the low side. A 15 percent decline would bring prices back to their level in early 2005 — when the bubble was already well inflated. If prices fall back to their level in early 2003, that’s a 30 percent decline.

Price declines still have a ways to go (see here for a discussion of real prices, price-to-rent ratio and price-to-income ratio).