According to Moody’s, the San Diego-Carlsbad-San Marcos triumvirate is in store for an aggregate home price decline of 10.9% between the peak (which they peg at Q1 2006) to the trough (Q4 2008).
While I’m all for mainstream outfits acknowledging that San Diego prices are going to drop, the particular forecast seems hopelessly optimistic in comparison to what’s happened already.
The S&P Case Shiller Home Price Index — which is as good a measure of aggregate price movements as you will find — indicates that San Diego home prices had already fallen 7.6% from their peak as of June. That reflects pricing on deals closed in May or even late April, which means that the prices reflect neither the effect of the credit crunch (round 2) nor the increasing prevalence of distressed inventory over the ensuing months.
Which is to say as of right now, aggregate prices have almost certainly declined more than the June HPI’s 7.6% (and that’s without even considering the fact that the HPI is probably overstating home prices because it has difficulty accounting for seller concessions or home improvements). We may be nudging up towards that 10.9% decline as we speak.
So it just seems a bit optimistic to assume that after all is said and done — "all" here referring to the unwinding of a record-shattering housing bubble that has led to widespread foreclosures, an abrupt tightening of mortgage credit, and real estate valuations that have nothing to do with their underlying fundamentals — that home prices are barely going to fall any more than they already have.