Prices need to fall by another 10-15% between now and mid 2011 in order to return to the historic ratio, suggesting the housing bust is only halfway through.ДЇirst tuesday take: As we have always said, the median price is an abstraction totally disassociated with the actual real estate market. The national ratio stayed somewhere between 5% and 5.5% from 1960 to 1995, when it then plummeted to 3.5% at the height of the boom in 2006.

One of the strongest predictors of future housing prices is a ratio calculated by comparing the price of a house and the value of future ownership (as rental income or as money saved by the homeowner not paying rent, called implicit rent). But their model suggests that six states, including California, may see a continued drop of 25% or more. Goldman Sachs, using a model that connects housing prices with disposable income and long-term interest rates, expects the national average of housing prices to drop 11-13% before housing price correction is complete. This gap will continue to widen by the beginning of 2010 when foreclosures will once again begin to pour into the market. Currently, the national homeowner-vacancy rate is at a high of nearly 3% (which translates to a glut of over one million to be sold nationally), compared to the average number of homes to be sold between 19. While investors predict another 20% price drop, this may be an overstatement as the futures market is a microcosm of the larger, and more complex real estate market, including income properties.ДЄnother indicator for predicting how much further housing will drop is the gap between supply and demand. One predictor involves trendsetting based on real estate related futures contracts associated with the Case-Shiller ten city index. On top of the misleading alchemy of using not one but two median figures, credit standards have tightened like a vice, neutering any definitive insight these numbers could ever provide. cities shows a drop of nearly 16% by February 2009.ДЄnd how much have housing prices risen? Projecting this becomes even more convoluted.ДЄnother misleading measure from NAR indicates that payments on a house with a 30-year mortgage and a 20% downpayment took up 18.5% of the median familyвЂ™s income as of February, a drop of 26% from the 2007 peak. The S&P/Case-Schiller national index (a better price indicator which includes all types of homes, but misses some rural areas) shows a 10% drop from the housing price peak of the fourth quarter of 2007. Therefore, OFHEO understandably understates the rise and fall of housing prices, as the prices of those loans inflated the highest during the bubble, especially in California. The OFHEO only includes mortgages insured by Fannie Mae and Freddie Mac, which excludes any data on subprime or jumbo loans. These numbers show that prices nationally have only fallen 3% from their peak. The Federal Reserve uses national numbers taken from the Office of Federal Housing Enterprise Oversight (OFHEO). The median price is a fabrication, the creation of an exceedingly misleading mathematical abstraction. But NAR relies on the median price, a phantom figure representing abstract property which does not actually exist and does not reflect the price mix of homes. Their data shows that prices are down 13% from their peak in April 2007. The most popular national answer (but by far the least accurate) is provided by the National Association of Realtors (NAR). How far have housing prices fallen? The answer depends on who you ask.

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