US Median Home Price Forecasted To Trough in 2010
US median home price to stabilize during 1Q2010. The national median home price ($216,334 as of October 2008) is forecasted to experience a price compression in 2009 and trough and stabilize in 2010. Since March 2007 (19 months ago when the US median home price peaked at $262,600), home prices rapidly decreased $46,266 or -17.62% and median home prices are expected to continue falling through 2009 and into 2010. According to Competitive Analytics’ proprietary Peak-to-Trough Home Price Model (which analyzes and forecasts over 100 economic and housing variables for all submarkets across the US), the pending trough cycle for the US is anticipated to start during October 2009. If this scenario is realized, the national peak-to-trough home price cycle will decelerate until it approaches levels commensurate with the “Moderate/Conservative Scenario Affordable Home Price.” Over the prior month, US median home prices decreased $2,066 (-0.95%) and will continue to do so through Phases 4 and 5 of the Nine Phases of Business Cycles. A blip of encouragement can be found because the US median home price should enter Phase 4 next year which should mark the beginning of a slowdown in deceleration. Phase 5 represents the “trough phase” and once complete, Phase 6 will begin the first phase of economic expansion…and although home price acceleration typically lags national TPSI, home prices will begin a new cycle of appreciation thereafter.
Key Point #1 – Home price trends often lag macro-economic conditions by 5 to 14 months. Please see story about the 1000 Point Strength Index. Although the national economy is expected to trough during August 2009, US home prices are not expected to trough and stabilize until 2010.
Key Point #2 – Contrasting national home price cycles, Peak-to-Trough Home Price Cycles for every geo-submarket across the US are expected to experience vastly different trough dates, trough prices, and anticipated rates of acceleration during the next recovery/expansion phase. Although obvious points, it is worth emphasizing that A) Numerous “high beta” submarkets (e.g. numerous submarkets located on the west coast) are expected to experience trough dates either much earlier or much later versus the nation; B) Specific submarkets will experience either vibrant or sluggish rebounds due to a blending of their distinct local socio-economic characteristics, local demographic trends, local inventory/supply trends, and other local and regional demand drivers; C) Specific product segments will experience materially different price trends due to extremely different net demand forecasts by product type which is affected by hundreds of direct and indirect variables.
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New Rules and New Tools – This current housing and economic cycle is quite unique (understatement of the century) and should have provoked new rules and new techniques regarding how to forecast submarkets more effectively. However, the “techniques” still employed today by many “consultants” are ignoring many of the key components driving this new paradigm shift. Analyzing employment, permits, population, and inventory are important, but these are not the only key drivers that need to be analyzed and monitored. And because we are organized more as a think tank versus a consulting firm, Competitive Analytics analyzes such variables as foreclosure trends by price point, REO conversions, inventory momentum, relative net demand, capital market dynamics, mark-to-market precision home valuation, and many other “non-traditional” variables…many of which we have developed in-house. And new rules require new tools to calculate these new variables such as Competitive Analytics’ new proprietary “Mark-to-Market Forecasting Models” and “Peak-to-Trough Business Cycle Models.” These bleeding-edge methodologies employ our innovative new 1,000 Point Strength Index (TPSI) which delivers a level of comprehensiveness and precision never before available. And although navigating both a downshifting and up-shifting business cycle is a formidable task, we fervently believe that delivering the most advanced quantitative tools and analytical methodologies will minimize risks and maximize opportunities for our clients. By integrating advanced econometric modeling and applied mathematics with a database of over 2,000 in-house economic and demographic indicators, 30 geographic levels, and over 1,500 cleansed data sources, Competitive Analytics is able to identify, isolate, and forecast a myriad of key “market drivers” for any sector, industry, company, product, service, or project.