Home price declines throughout the summer months were softer versus earlier in the year because of record high affordability and the first-time homebuyers tax credit.

Over the near term, however, the prospects of an increase in price declines are higher as several MSAs have moved off their "maximum affordability" levels,  Deutsche Bank Securities analysts said, while housing activity in the winter months tends to fall off. 

In their latest outlook for U.S. home prices, Deutsche Bank analysts are projecting additional declines of 10% to 12%, which equates to a peak-to-trough drop of 37% to 38%.

Analysts assumed a 5% mortgage rate, but warned that it is very likely that rates will be higher, which could lower housing affordability and which could lead to further price declines. They added that, over the long run, their model finds that a 50 basis point change in mortgage rates results in approximately a 300 basis point change in home prices, all things equal. 

Meanwhile, Citigroup Global Markets analysts are also predicting that the market will experience an additional  10% drop in home prices.   

Looking at the 10 largest mortgage markets, Deutsche analysts said that affordability levels have declined from the previous levels. 

In September, they found that four of the MSAs were as or more affordable than at any time in history.

Currently, just Las Vegas-Paradise, NV remains at "maximum affordability," while the other nine MSAs would need to see price declines to revert back to maximum affordability.  They added that looking at the top 100 MSAs, at the end of 2Q09, 39 were considered at maximum affordability compared with 25 at the end of 3Q09. 

Overall, Deutsche analysts warned that housing market fundamentals are still very weak despite recent positive factors of labor market stabilization and the government programs. 

At the same time, Citigroup analysts believe that high affordability might help anchor home prices and keep them from falling by a larger amount than is currently expected.

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