Local Market Monitor, which studies 300 metro areas, anticipates an average 8 percent drop in home prices nationally during the next 12 months.
Almost all the 60-plus indicators that John Burns Real Estate Consulting tracks are negative, Porter says. Housing prices will continue to tumble due to tremendous supply-and-demand imbalances, he adds.
The firm expects the median home price in 2009 will be 16 percent less than 2008, falling another 5 percent in 2010 and flattening in 2011.
The new "normal," at least for now, is a market where foreclosure or pre-foreclosure sales are setting the median sales price.
"In many markets ... the median sale right now is a distressed sale. It's something that's being sold at a loss or at a deep, deep discount," Porter says.
Foreclosures are putting severe "downward pressure" on prices, which, Markstein says, makes it difficult for people trying to sell existing homes and for builders with new properties.
"Essentially they're competing with a closeout price or inventory liquidation," he says.
Swallowed by supplyThirteen months of new home inventory and nine months of existing homes are far too much for price stability to occur, Porter says. Inventory levels will return to "normal," (six to seven months' worth) in late 2010 and will remain low through 2011.
"The trough of this market in terms of construction will probably be 2010," Porter says.
Inventories in a few markets might stabilize this year only because construction activity has plummeted. "Builders are putting up homes at the slowest pace in post-war history," Chen says.
The builders organization expects housing starts nationally to bottom out during the middle of 2009. It is forecasting 469,000 housing starts -- 353,000 single-family and 116,000 multifamily -- this year. Last year, there were 906,000 starts (622,000 single-family and 284,000 multifamily).
Markstein estimates California, Arizona, Nevada, Florida and Michigan account for at least 75 percent of the excess inventory. "But if you go to other parts of the country, let's say Wichita or Omaha, you'll find, they never really had excess inventory, or if they did, it was pretty small and they're pretty much in balance," he says.
John Burns Real Estate Consulting's forecast sees single-family construction bottoming at 275,500 permits in 2010.
"The way prices have gone down and the way land prices have yet to see the same correction, in some cases it's not feasible to build a home and sell it at a profit," Porter says.
Multifamily construction has a better outlook, expected to bottom this year at 153,500 units and will grow due to an undersupply of new apartments in good locations, Porter says.
Demand downExisting home sales are down 8.6 percent year-over-year, and dropped more than 9 percent in the first three months of 2009, according to John Burns Real Estate Consulting.
The firm expects existing home sales to bottom out this year at extremely low levels -- similar to those in 1997. New homes are expected to bottom at 204,000 sales in 2010.