Deutsche Bank: Home Prices to Drop a Further 10 to 12% From Current Levels

Deutsche Bank (DB) has taken an opposing view to Moody’s (MCO) prediction made Thursday that suggested “the bottom has been reached for the [housing] sector.” The ratings agency changed its outlook on the U.S. home-builder sector to stable from negative.

Deutsche Bank however, sees a different scenario for the U.S. housing market — which has been on government life support for much of 2009. DB’s researchers believe home prices will drop a further 10 to 12% from current levels.

HousingWire: “Today, Deutsche Bank researchers say these predictions will likely become a reality, with the total peak-to-trough decline of US home prices hitting nearly 40%. In the current outlook, they say home prices will drop a further 10 to 12% from current levels.

The results are part of a nationwide projection that represents a weighted average across 100 individual metropolitan statistical areas (MSAs).

The projections come from the securitization arm of the investment bank and is the first forecast expanded to include more factors that impact home prices overall as well as a variety of ranges (month-to-month, peak-to-trough).

“A change in market psychology (which can both cause, and be caused by, recent home price increases), some signs of labor market stabilization and various government programs aimed at easing the housing crisis have all been constructive for housing,” write the researchers. “These changes may have helped abate the freefall in prices we saw in early 2009, and the “overcorrection” we started to see in home prices.”

Earlier this week, Fitch came out saying that with various macroeconomic housing and related statistics “bottoming about mid-year 2009 and subsequently moving forward in fits and starts, a four-year downturn has evidently come to an end for U.S. home builders.”

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