I’ll just take the market’s view here; using the futures prices from the CME (via ino.com), prices will fall about another 16% from June (or 17% in log terms):
Figure 1: Log Case-Shiller 10 city price index, (red), CME futures prices (red squares), and CPI adjusted SP Case-Shiller 10 city price index (dark blue). CPI-All rescaled to 100 2008M01-08M06. NBER defined recessions shaded gray. Dashed line indicates start of plotted futures data. Source: Standard and Poors’
[xls], ino.com – real estate (accessed 21 Sep 2008), St. Louis FRED II, NBER, and author’s calculations.
The latest reading from ino.com for the Case Shiller US composite futures indicates a nominal bottom in May 2010, with a reading of 151.6 (or a bottom of of 151.4 in May 2011 if you want to nitpick.
This would represent about a 40% decline (in log terms) in housing prices relative to the peak in June 2006, not too far away from the 40% (in log terms) decline I predicted in March of this year for 2009Q4, based upon the relationship between the relationship between the OFHEO and the Case-Shiller indices, and the WSJ survey of forecasts for declines in the OFHEO index up to 2009Q4.
The foregoing suggests that the market’s expectations are indeed for the assets underlying the RMBS to begin rising in nominal terms around mid-2010…or mid 2011. This perspective is not new, but it’s interesting to see how relatively unchanged it’s been since three months ago.