The blind men and the elephant?

Calomiris, Longhofer, and Miles report:

We conclude that declines in house prices are highly likely to remain
small. Our analysis reveals, unsurprisingly, that foreclosures and home
prices have negative effects on each other over time, but this does not
imply a vicious cycle of collapsing prices. Our models predict that as
foreclosures continue to climb in many states, house prices will remain
flat or decline in those states — but will not collapse.

..the effect of foreclosure shocks on
house prices is small. Furthermore, other fundamental factors (such as
employment growth and a slowing of the growth of the housing supply
over the past year and a half) will cushion the impact of foreclosures.

…Even under an extreme
worst-case scenario for foreclosures…U.S.
house prices just aren’t going to fall by very much in the next two
years. In our worst-case scenario, the average cumulative decline is
about 5 percent, and only 12 states experience declines greater than 6
percent by the end of 2009.

There is more at the link, including a claim that the Case-Shiller index is unrepresentative.  Here’s another report, which does not literally contradict the first:

The percentage of mortgages in arrears in the category of loans one
rung above subprime, so-called alternative-A mortgages, quadrupled to
12 percent in April from a year earlier. Delinquencies among prime
loans, which account for most of the $12 trillion market, doubled to
2.7 percent in that time.

In other words, you can be an optimist about agency bail-outs, and a pessimist about the financial pain that many Americans will suffer.


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