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The House Price Outlook. Presented by: Mark M. Zandi, Chief Economist. March 3, 2008. An Unprecedented Housing Downturn. % change from peak, Sources: Fiserv Lending Solutions, Census, Moody's Home Sales. Housing Starts. House Price. Forecast peak-to- trough. Peak to 07Q3.

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the house price outlook

The House Price Outlook

Presented by:

Mark M. Zandi,Chief Economist

March 3, 2008

an unprecedented housing downturn
An Unprecedented Housing Downturn...

% change from peak, Sources: Fiserv Lending Solutions,

Census, Moody's

Home Sales

Housing Starts

House Price

Forecast peak-to- trough

Peak to 07Q3

90s peak to trough

80s peak to trough

throughout much of the country
...Throughout Much of the Country

Projected peak-to-trough house price decline, %


Sources: Fiserv Lending Solutions, Moody's, OFHEO

-10% to -20%

0% to -10%

>= 0%

U.S. = -20%

the housing market is awash in inventory
The Housing Market Is Awash in Inventory...

# of excess vacant homes for sale, ths

Sources: Census, Moody's

as foreclosures surge
…As Foreclosures Surge

First mortgage loan defaults, ths, SAAR

Sources: Equifax, Moody's

the mortgage securities market is broken
The Mortgage Securities Market Is Broken…

Bond issuance, $ bil, annualized

and a credit crunch has set in
...And a Credit Crunch Has Set-In

Net % of banks tightening mortgage loan standards


Sources: FRB, Moody's


Total market


recession already plagues parts of the country
Recession Already Plagues Parts of the Country

In recession

Near recession


an econometric analysis of what it would take
An Econometric Analysis of What It Would Take

…To reach a bottom in the housing market by spring 2009

Baseline outlook

Job growth

the banking system is at significant risk
The Banking System Is At Significant Risk…

Residential RE assets of large commercial banks

Source: Federal Reserve Board

Share of assets

% (R)

$ bil (L)

and the infection spreads
...And the Infection Spreads...

Change in Delinquency Rate, 07q4-05q4

Source: Moody's

adding up to big losses
…Adding Up to Big Losses

Household debt in delinquency or default, $ bil, annualized

the federal reserve must be more aggressive
The Federal Reserve Must Be More Aggressive…

Federal funds future contract for September 2008

Source: CBOT

as do fiscal policymakers
…As Do Fiscal Policymakers

Non-conforming share of 2006 originations, U.S. = 50%


60% - 40%


Sources: 2006 HMDA,