How much further could home prices tumble in the New York City metro area? Deutsche Bank predicts a decline of 40.6% from the first quarter of 2009.
That’s a slight improvement over the 47.4% decline that the bank’s analysts had forecast in March, and it reflects in part the fact that prices have dropped since then. Still, prices would have to drop another 32% from the first quarter of 2009 to return the New York market to levels of affordability not seen since 1998.
Affordability measures whether a household at the median family income could purchase a home given median prices and at prevailing interest rates. (Deutsche Bank assumes a 5% mortgage rate, which means that prices could have to fall further if interest rates don’t return to the 5% level that they reached earlier this year.)
Already, affordability in some 74 of the top 100 U.S. housing markets have already returned to their historic highs.