Analysis of 379 metro areas forecasts double-digit declines for nearly 20 markets.
NEW YORK (CNNMoney.com) -- The housing market will get worse before it gets better - that's the finding of an analysis by Moody's Economy.com to be released Wednesday.
In the survey of 379 metro areas, the study's authors concluded that nearly 20 areas eventually could experience a "crash," or a decline of more than 10 percent from peak to trough. The most hard-hit areas will be in California, alongside the Southwest coast of Florida, and in Arizona and Nevada.
In addition to 30 areas already experiencing declines, the study predicts that 70 others will soon experience measurable declines, with drops extending into 2008 and even 2009.
Using a separate analytical approach, the study's authors found that more than 100 markets have a significant probability of experiencing declines by this time next year. The authors considered home affordability, the local job market, supply/demand, and overall values.
Those 100 areas represent nearly half of the country's housing stock. As a result, the authors write, "odds are high that national home prices will decline in 2007; the first decline in nominal national house prices since the Great Depression."
Of the 100 largest markets with forecast declines, Cape Coral, Fla., is forecasted to post the biggest drop in home prices - 18.6 percent from the peak in the fourth quarter of 2005 to the trough in the second quarter of 2007.
Moody's Economy.com forecasts that home prices in Reno, Nev., will drop 17.2 percent by the fourth quarter of 2008.
The authors note that the housing boom has already begun to unwind, driven by the increase in adjustable mortgage rates - putting homes further out of reach of buyers - and the decline in "flippers" who had pushed prices higher hoping for quick sales.