House prices continued to plummet in January, with the Case Shiller index rate of decline inching up toward 19.5% year over year (see first chart below). The national peak-to-trough decline is now 27%, and it will likely exceed 40% before we hit bottom. If there’s any good news here, it’s that the rate of decline appears to be stabilizing.
After accelerating at a rate of about 1 point per month for much of last year, the rate of decline in the 10-City index has held at 19% for the past four months. Why is this notable? Because before prices can start going up (or even stop going down, they have to stop going down at an accelerating rate. So this appears to be the first hint of an eventual bottom in the housing market.
To be clear: We are not suggesting the housing market is “bottoming”–not by a long shot. House prices will likely continue to drop for at least another two years, and they’ll likely drop at least another 15%-20% from here–for a total peak-to-trough decline of more than 40%.