by Calculated Risk on 11/27/2007 01:35:00 PM

Peter Y. Hong at the LA Times writes: Homeowners' big question: How low will prices go?

Click on graph for larger image.

The LA Times article focuses on California. This graph shows the Case-Shiller home price index for several selected cities. If SoCal prices fall 25%, then prices in other areas - like Miami and Las Vegas - will probably decline a similar amount. These are nominal prices, I'll have more on Real vs. Nominal prices later today.

From the LA Times:

No one knows how severe the slump will be, but economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up.

Most said values would continue falling through at least next year, and some thought the market wouldn't reverse course until 2010.

That could translate to big declines for home buyers who bought at the peak of the market, which various measures place in late 2006 or early 2007.
...
Some analysts, including UC Berkeley professor Kenneth Rosen, believe the severity of the downturn will vary by region.

Areas such as the Central Valley and the Inland Empire will be the hardest hit, he said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15%.

But "in areas where there is very little new housing, where it's hard to build and a lot of wealthy people live, there will be little decline or maybe none at all."
...
But others call this wishful thinking, saying low prices eventually work their way to even the most affluent areas.

"Every place takes the hit in the long run," said Christopher Thornberg of Beacon Economics, a consulting firm in L.A.
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[Edward E. Leamer of UCLA's Anderson Forecast] and Thornberg are among the most bearish of analysts, saying the recently ended housing boom pushed prices out of sync with incomes.

Los Angeles County median home prices are about 40% to 50% higher than the median income justifies, Thornberg said. He said the market would settle when prices and incomes became more closely aligned.

"Southern California prices will fall 25% from their peak and won't find their bottom until the end of 2009," Thornberg said.

Leamer also sees a drop-off at the high end of the range -- 20% to 25% -- and sees the downturn lasting into 2010.

by Calculated Risk on 11/27/2007 11:08:00 AM

From OFHEO: 2008 Conforming Loan Limit $417,000

Office of Federal Housing Enterprise Oversight Director James B. Lockhart today announced the maximum 2008 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac (the Enterprises) will remain at the 2007 level of $417,000 for one-unit properties for most of the U.S. Higher limits apply to Alaska, Hawaii, Guam and the U.S. Virgin Islands as well as to properties with more than one unit.

The conforming loan limit determines the maximum size of a mortgage that an Enterprise can buy or guarantee. By law the maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey (MIRS) of the Federal Housing Finance Board (FHFB). The FHFB reported the decline in the average price was $10,685 or 3.49 percent, from $306,258 in October 2006 to $295,573 in October 2007. The combined two-year decline is now 3.65 percent.

“While the house price survey data used in determining the conforming loan limit show a decline over the past year, as previously announced and consistent with the proposed new conforming loan limit guidance, the level will remain at $417,000 for the third straight year,” said Lockhart.

The FHFB is reporting the year over year national price decline was 3.49%.

by Calculated Risk on 11/27/2007 09:58:00 AM

From MarketWatch: Home prices falling everywhere: S&P

U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday.

Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up before the August freeze in mortgage markets, Standard & Poor's reported.

"There is no real positive news in today's data," said Robert Shiller, chief economist at MacroMarkets LLC, and the co-developer of the index.

For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.

by Calculated Risk on 11/27/2007 12:35:00 AM

From the WSJ: Abu Dhabi to Bolster Citigroup With $7.5 Billion Capital Infusion

Citigroup Inc. ... is receiving a $7.5 billion capital infusion from the investment arm of the Abu Dhabi government.
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As a result of the deal, the investment authority known as ADIA will become one of Citigroup's largest shareholders, with a stake of no more than 4.9%.
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In exchange for its investment, ADIA will receive convertible stock in Citigroup yielding 11% annually. The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011.

by Calculated Risk on 11/26/2007 08:52:00 PM

From the Cleveland Fed: Fed Funds Rate Predictions

Click on graph for larger image.

A number of Fed presidents will be speaking this week, including Cramer's favorite Fed President William Poole on Friday.

The Fed has been saying don't expect a rate cut in December; meanwhile the market is debating the size of the cut: 25bps or 50bps.

Since the credit crunch is worsening again, I've linked to Cramer's August meltdown at the bottom of the posts.