Mark Zandi of Economy.com Sticks His Neck Out

Mark Zandi, chief economist at Moody's Economy.com, is making some bold predictions for the US housing market and the effects of the Federal economic stimulus package.

On the housing market (Businessweek.com, 1/26/09)

"Moody’s Economy.com Chief Economist Mark Zandi is coming out with a new study on the housing market. He’ll discuss it in a conference call with clients on Feb. 5.
Moody’s offered a sneak peak. Among the conclusions:

· Home prices will stabilize by the second half of this year.
· The national Case-Shiller home price index will decline by another 12% from the third quarter of last year for a total peak-to-trough decline of 30%.
· By the end of this unprecedented downturn, house prices will have declined by double digits peak to trough in nearly 62% of the nation’s 381 metro areas. In about 10% of metro areas, price declines will exceed 30%."

For $250, you can hear it straight from the man himself on Feb. 5.


On the stimulus (The Economic Impact of the American Recovery and Reinvestment Act Mark Zandi - January 21, 2009, Economy.com)

"The fiscal stimulus plan proposed by the House Democrats includes a reasonably designed mix of government spending increases and tax cuts. The spending increases total about $550 billion in 2009-2010, and there are $275 billion in tax cuts. While the timing has yet to be determined, the tax cuts are expected to occur largely this year and much of the spending would begin in 2010... Increased government spending provides a large economic bang for the buck and thus significantly boosts the economy. The benefits begin as soon as the money is disbursed and are less likely than tax cuts to be diluted by an increase in imports. The most effective proposals included in the House stimulus plan are extending unemployment insurance benefits, expanding the food stamp program, and increasing aid to state and local governments. Increasing infrastructure spending will also greatly boost the economy, particularly as the current downturn is expected to last for an extended period. Most of the infrastructure money will be spent on hiring workers and on materials and equipment produced domestically. Tax cuts generally provide less of an economic boost, particularly if they are temporary; on the other hand they can be implemented quickly..."

The Right Man at the Right Time

By now most know about the Fannie Mae & Freddie Mac "bailout". It's been blogged, reported & commented about for months. So if you didn't catch it on every major news channel & site this morning, you will.

While some are questioning whether the largest bailout in US history was really necessary, most (experts) say that it was and the fallout from other options (receivership or equity injection) would have been worse.

Paulson: "We had no choice"


And former Secretary of Treasury John Snow said it best on Squawk Box this morning (interviewed in front of the Rotunda at UVA), "This action was necessary in the face of the realities of the financial markets, the need to stabilize housing and the larger issues of the US economy and it's spill over affects on the rest of the world. So we are where we are, I guess now the question is can we find a good path out of this so that we get a permanent solution coming out of the next congress..."


Realty Check (CNBC) on the the housing market will react.
Questions is, "How much and how soon"
Mark Zandi of Moody's Economy, "It will help the housing market, it won't bring an end to the housing downturn immediately though."


I truly feel sorry for the thousands of employees at Fannie Mae & Freddie Mac. This is like Enron times two. "Fannie Mae’s workers had $116 million in the employee stock ownership plan at the end of 2006. Today, it’s more like $17.5 million. Ouch."