Goldman Sachs analyst Jan Hatzius says home prices will continue to fall through 2012.

“We expect a 3 percent decline in the Case-Shiller 20-city index this year and another 1 percent in 2011,” Hatzius says in a note to investors.

The effect of federal mortgage modification programs has begun to wane, Hatzius notes.

“Data reported from the Treasury indicate that the number of canceled modifications in the Home Affordable Modification Program (HAMP) jumped significantly, while the rate of new modifications has declined to a fraction of the previous pace,” Hatzius notes.

“Most of these loans have not yet entered foreclosure, and it appears that many will enter non-federal modifications,” he says.

“That said, the effect of this program is nevertheless starting to reverse, from one that absorbed would-be distressed supply from the market, to one that will at some point add it back.”

According to reedconstructiondata.com, new single-family home sales crashed after the $8,000 tax credit expired, falling to only 300,000 units in May, the lowest figure yet in this historic period of depressed U.S. residential markets.