Housing-Price Economist Sees Market as Near Bottom

Wall Street Journal (09/12/08) P. A5; Lahart, Justin
Wellesley College economist Karl Case presented a paper at the Brookings Institution on Sept. 11 that suggests the housing market may be close to bottoming out. He cited modest gains in residential prices in nine of the 20 markets covered by the S&P/Case-Shiller home price index and a narrowing of the gap between incomes and home prices that occurred during the end of previous property downturns. Also at the Brookings Institution, Goldman Sachs economist Jan Hatzius presented a paper that uses state-level data from the Mortgage Bankers Association from 1998 to the 2008 second quarter and estimates $473 billion in overall mortgage losses if the Case-Shiller index holds steady at June levels. Hatzius calculates that losses would rise to $636 billion if home prices drop another 10 percent and to $868 billion if prices plunge 20 percent, with lenders shaving $2 trillion off available credit in the event of a 10-percent decline.