Why Home Prices Have Much Further To Fall

There has been a deluge of articles recently about the upticks in the housing data.  The consensus is that these data points are surely pointing the way, finally, to a bottom in the depressing decline of real estate.  Let me acknowledge that I do not dispute the improvement in the data regarding home starts, permits, pending sales, etc. but let's be realistic in the fact that all of these are still mired at very depressed levels.  So, while optimism is certainly always a welcome thing, for the average American, the world is quite different. 

(Note:  I suggest a review of recent posts on Housing Is Not Affordable and The Margin Effect for more background on why housing is going to be in the trenches much longer than expected)

The point I want to specifically focus on today is home prices.  After the past few bloody years of price declines, and repeated calls of housing bottoms each year, this year proves no different with yet more calls for a housing bottom in 2012.  However, why shouldn't there be?  Home prices have declined, according to our NAR/Core Logic Composite Index (an average of the two), by a whopping 36%.  Therefore, the assumption is that if home building is stabilizing then it is only a function of time until home prices began to rise as well.   Not so fast.

People Buy Payments - Not Houses

When the average American family sits down to discuss buying a home ...