Not (yet) the worst housing downturn

The current housing-market slide is the second-worst period of falling home sales in 30 years.

On average, the past six housing downturns have run 24 months, with sales falling 28.2 percent from peak to trough, Piper Jaffray analyst Robert P. Napoli said.

The current one, which began when new and existing home sales peaked in June 2005, has already topped the average downturn in terms of length and sales decline.

Only the 1978-82 downturn was worse, and that was marked by an average 30-year fixed mortgage rate of 13.5 percent, according to Freddie Mac. The current rate averages 6.1 percent.

Wells Fargo economist Michael J. Swanson says housing troubles and the related credit crisis have led the nation into recession. "They will need to lead it out of recession," he writes.

A bottom for home prices will eventually rekindle demand, he says.

Home prices fell 14.8 percent from a peak in July 2006 to this February, based on the S&P/Case-Shiller 20-city index. Price growth slowed until it began dropping year over year in January 2007.

Economists, on average, expect home prices to decline 12 percent this year and fall slightly in 2009 before picking up in 2010, according to a May 13 survey by the Philadelphia Federal Reserve.

A reading on first-quarter prices from the Office of Federal Housing Enterprise Oversight, which measures prices for homes with mortgages up to $417,000, is due today.

Lehman Brothers analyst Megan Talbott McGrath expects a 0.5 percent decline in the median home price from the prior quarter.

A Commerce Department report on new-home construction in April showed the biggest jump in more than two years at 8.2 percent, but analysts say most of the gain was from the volatile apartment sector, not the larger single-family home arena.

"The headline increase in starts means nothing," writes High Frequency Economics Chief U.S. Economist Ian Shepherdson in a client note.

A reading on April existing home sales Friday is expected to show a dip from March, according to Thomson Financial.