Tuesday, November 06, 2007

IndyMac House Price Forecasts

by Calculated Risk on 11/06/2007 12:30:00 PM

IndyMac has provided a substantial amount of industry data and analysis: IndyMac Bancorp, Inc. Third Quarter Review (hat tip jmf). Here are a few charts and excerpts:

House Price Risk Assessment Click on graph for larger image

IndyMac is forecasting 10% price declines in the high risk areas, 8% in the moderate risk areas, and 6% in the low risk areas.

Forecasted Home price depreciation ranging between 6% and 10% is factored into our loss expectations that drive valuation and reserves – average HPI declines expected to be around 9%

Indymac’s forecast of housing price declines are based on risk grades from PMI, MGIC and AIG/United Guaranty
National House Price Forecast These are the projected nationwide year over year house price declines based on the OFHEO index (from Moody's). IndyMac notes:
Expected home price declines used in our reserves and valuations are slightly higher than average US home declines as predicted by Moody’s economy.com
This would be a very short housing bust if year-over-year nationwide house prices started to recover in late '09 as shown by the OFHEO HPI. Also only a 10% decline in prices in the high risk areas is probably way too optimistic.

Give IndyMac credit, at least they are releasing their forecasts (and a substantial amount of data). I'd like to see the Citigroup house price forecast!