Deutsche Expects 32% Peak-to-Trough House Price Decline

Housing in the US is on track to lose nearly one-third — or 32% — of its aggregate value from peak to trough, according to Deutsche Bank research on the non-agency residential mortgage-backed security (RMBS) market.

The aggregate value of the US housing market for 75.5m total US homeowners stood at $24trn at its peak in Q206. Price depreciation so far wiped out about $5.7trn in housing wealth as of Q209, reducing US housing market aggregate value to $18.3trn, Deutsche said. And, the market hasn’t hit bottom, yet.

In aggregate, 66% of housing wealth destruction so far was concentrated in four states, commonly known as the “sand states”: California ($2.58trn), Florida ($815bn), Arizona ($325bn) and Nevada ($179bn).

But the declines in house prices, aggravated by sweeping foreclosures and the significant shadow inventory set to depress prices further, looks to continue well into 2010. Deutsche estimates the aggregate US housing value will lose another $2trn of from Q209 to Q210, based on metropolitan statistical area-level house price outlooks as of September 14.

Based on that projection, the aggregate US housing value may bottom at $16.3trn in Q210 — 32% below the Q206 peak.

Write to Diana Golobay.